Moody’s Lowers Russia’s Debt Rating to Ba1
February 21, 5:49 UTC+3
Finance Ministry sees politics behind
MOSCOW, February 21. /TASS/. International rating agency Moody’s has revised downwards Russia’s sovereign debt rating to Ba1 (speculative) from Baa3, offering the continuing crisis in Ukraine and dwindling oil prices as the main reasons. The Russian Ministry of Finance promptly replied the decision was politically motivated.
Moody’s is the second world rating agency after Standard&Poor’s to have downgraded Russia’s sovereign rating to the speculative level. Fitch has kept its investment level rating unchanged for the time being.
"The continuing crisis in Ukraine and the recent oil price and exchange rate shocks will further undermine Russia's economic strength and medium-term growth prospects, despite the fiscal and monetary policy responses," Moody’s said.
Senior Russian legislator says Moody’s ratings not trustworthy
Sovereign debt ratings indicate a country’s ability to honor its liabilities on time. The lower the rating, the harder the access to international money markets. Russia has no immediate plans for foreign borrowings, though.
The sovereign rating’s fall usually entails a decline in those of individual companies. Many of potentially borrowers, such as Rosneft, Sberbank and the VTB, are already under sanctions and have no opportunity to borrow on foreign markets anyway.
Russia’s response
Finance Minister Anton Siluanov dismissed Moody’s decision as politically motivated. He argues that the "exhaustive" information about the condition of Russia’s economy the agency had at its disposal must have been ignored.
"I suspect that in making this decision to lower the rating the agency was guided by political factors above all," Siluanov told the media. "I believe that Moody’s rating is not just overly negative, but also based on an extremely pessimistic forecast, unparalleled these days," Siluanov said.
In its statement Moody’s pointed to the negative effects of "fiscal pressures and the continued erosion of Russia's foreign exchange reserves in light of ongoing capital outflows and restricted access to international capital markets." Also, Moody’s recalled high and growing inflation.
"The agency predicts this year’s capital flight in an amount of 272 billion dollars, the DGP’s decline by 8.5% over two years and this year’s inflation above 22% These estimates are in stark contrast to the economic forecasts of the International Monetary Fund, the World Bank and international banks," the Russian Finance Ministry said in a statement.
Ability to resist external shocks
Moody’s argues that the conflict in Ukraine may force the Russian authorities take certain action that may "directly or indirectly undermine timely payments on external debt service." Also, "the assignment of the negative outlook reflects the potential for more severe political or economic shocks to emerge, related either to the military conflict in Ukraine or a renewed decline in oil prices, which would further impair Russia's public and external finances," Moody’s argues.
The Russian Finance Ministry disagrees. "In recent months Russia has demonstrated resistibility to unprecedented external shocks, in the first place, the steep and considerable fall in the price of oil."
Moody’s revision of Russia’s rating followed last week’s four-party talks by the leaders of Russia, France, Germany and Ukraine in Minsk that produced a ceasefire arrangement in Donbass.
The agency suspects that the Russian government may face "substantial difficulty in dealing with a wide range of economic, fiscal and monetary challenges" and speculates that the decision to lower the key rate to 15% may trigger further devaluation of the rouble.
The Ministry of Finance recalls in response that the rating’s revision followed even though the rouble has firmed 11% against the dollar since the beginning of February, which is the best parameter among the emerging markets’ currencies. The situation on the raw materials markets was regaining stability, the Finance Ministry said, oil prices recovered by 23% and the yields on rouble-denominated government bonds were down by 300 basis points.
The Finance Ministry is certain that Moody’s opinion should not cause an extra major impact on the money market.
"For participants in the internal debt market, which we currently consider as the sole source of borrowing, the issuer’s foreign currency rating is of smaller significance. The two other major rating agencies have preserved their evaluations of Russia’s national currency liabilities at the investment level BBB- (S&P lowered to the speculative level only Russia’s foreign currency rating - TASS)," the Finance Ministry said.
Putin says Russia will always find relevant responses to outside pressures
February 20, 23:29 UTC+3
Russian President also said the Russian Armed Forces was constantly perfecting its skills and seeking to match the toughest new requirements
MOSCOW, February 20. /TASS/. Russia will always find relevant responses to any external pressures, President Vladimir Putin said on Friday as he spoke at a gala concert on the occasion of Fatherland Defenders Day, which this country marks as a national holiday on February 23.
"No one should have any illusions that they can win military preponderance over Russia or put any kind of pressure on it, as we’ll always have appropriate responses to these acts of adventurism," Putin said.
"Our soldiers and officers have proved their capability for resolute, smooth, well-coordinate, professional, and courageous actions, for fulfilling the most complicated and unconventional tasks that any up-to-date, seasoned army with a high combat ability, deep-going traditions and a sense of military duty should be able to fulfill," he said.
He also said the Russian Armed Forces was constantly perfecting its skills and seeking to match the toughest new requirements, adding that much had been done in the past few years to improve the system of combat control.
"We’re successfully implementing a large-scale program of rearmaments in the Army and the Navy, with emphasis on the Air Force, space defence and nuclear forces," Putin said. "This is a guarantee of global parity of forces. We’ll continue doing everything in our power to build up the potential of the Armed Forces."
"I’d like to stress our willingness to fulfill our military construction plans under any circumstances," he said.
Putin added that the latter statement concerned in full measure the social issues of servicemen’s activity and well-being.
Russia’s former finance minister warns oil may briefly drop to 20 dpb
February 21, 3:18 UTC+3
Kudrin believes there are very many factors that keep putting downward pressures on oil prices
MAKHKACHKALA, February 21. /TASS/. Russia’s former finance minister, Aleksey Kudrin, does not rule out a brief drop in crude oil prices to 20 dollars per barrel.
In Friday’s trading on the London Intercontinental Exchange a barrel of Brent was trading at 60.41 dollars before the close. In January, Brent blend prices dropped as low as 48 dollar per barrel and even lower.
"I cannot rule out that at a certain point, for a very brief period, the price of oil may slump to 20 dollars," Kudrin told the media in Makhachkala on Friday. "I do not think most analysts agree this may last a while. At the moment the assumption is oil prices will be somewhere between 60 and 80 dollars per barrel this year. That the price is now back to 60 dollars says nothing at all. It may turn either way."
Kudrin believes there are very many factors that keep putting downward pressures on oil prices.
"For two or three year we shall see the world getting used to new prices and businesses evaluating the new opportunities. The world will realize at last what is the long-term price everybody will be prepared to agree to," Kudrin said.
The Russian government hopes that the oil price will stabilize at the current level, he recalled.
"Whenever I am asked for an opinion, I say that future prices are anyone’s guess. They may stay at 40 dollars per barrel for a long time, or they may be at 80 dollars," he concluded.
Earlier, Deputy Prime Minster Dmitry Medvedev said that in proposing adjustments to the budget the Cabinet of Ministers would proceed from a forecast price of 50 dollars per barrel. In that case the federal budget’s deficit will make up 3.8% of the GDP.
Finance Ministry sees politics behind
MOSCOW, February 21. /TASS/. International rating agency Moody’s has revised downwards Russia’s sovereign debt rating to Ba1 (speculative) from Baa3, offering the continuing crisis in Ukraine and dwindling oil prices as the main reasons. The Russian Ministry of Finance promptly replied the decision was politically motivated.
Moody’s is the second world rating agency after Standard&Poor’s to have downgraded Russia’s sovereign rating to the speculative level. Fitch has kept its investment level rating unchanged for the time being.
"The continuing crisis in Ukraine and the recent oil price and exchange rate shocks will further undermine Russia's economic strength and medium-term growth prospects, despite the fiscal and monetary policy responses," Moody’s said.
Senior Russian legislator says Moody’s ratings not trustworthy
Sovereign debt ratings indicate a country’s ability to honor its liabilities on time. The lower the rating, the harder the access to international money markets. Russia has no immediate plans for foreign borrowings, though.
The sovereign rating’s fall usually entails a decline in those of individual companies. Many of potentially borrowers, such as Rosneft, Sberbank and the VTB, are already under sanctions and have no opportunity to borrow on foreign markets anyway.
Russia’s response
Finance Minister Anton Siluanov dismissed Moody’s decision as politically motivated. He argues that the "exhaustive" information about the condition of Russia’s economy the agency had at its disposal must have been ignored.
"I suspect that in making this decision to lower the rating the agency was guided by political factors above all," Siluanov told the media. "I believe that Moody’s rating is not just overly negative, but also based on an extremely pessimistic forecast, unparalleled these days," Siluanov said.
In its statement Moody’s pointed to the negative effects of "fiscal pressures and the continued erosion of Russia's foreign exchange reserves in light of ongoing capital outflows and restricted access to international capital markets." Also, Moody’s recalled high and growing inflation.
"The agency predicts this year’s capital flight in an amount of 272 billion dollars, the DGP’s decline by 8.5% over two years and this year’s inflation above 22% These estimates are in stark contrast to the economic forecasts of the International Monetary Fund, the World Bank and international banks," the Russian Finance Ministry said in a statement.
Ability to resist external shocks
Moody’s argues that the conflict in Ukraine may force the Russian authorities take certain action that may "directly or indirectly undermine timely payments on external debt service." Also, "the assignment of the negative outlook reflects the potential for more severe political or economic shocks to emerge, related either to the military conflict in Ukraine or a renewed decline in oil prices, which would further impair Russia's public and external finances," Moody’s argues.
The Russian Finance Ministry disagrees. "In recent months Russia has demonstrated resistibility to unprecedented external shocks, in the first place, the steep and considerable fall in the price of oil."
Moody’s revision of Russia’s rating followed last week’s four-party talks by the leaders of Russia, France, Germany and Ukraine in Minsk that produced a ceasefire arrangement in Donbass.
The agency suspects that the Russian government may face "substantial difficulty in dealing with a wide range of economic, fiscal and monetary challenges" and speculates that the decision to lower the key rate to 15% may trigger further devaluation of the rouble.
The Ministry of Finance recalls in response that the rating’s revision followed even though the rouble has firmed 11% against the dollar since the beginning of February, which is the best parameter among the emerging markets’ currencies. The situation on the raw materials markets was regaining stability, the Finance Ministry said, oil prices recovered by 23% and the yields on rouble-denominated government bonds were down by 300 basis points.
The Finance Ministry is certain that Moody’s opinion should not cause an extra major impact on the money market.
"For participants in the internal debt market, which we currently consider as the sole source of borrowing, the issuer’s foreign currency rating is of smaller significance. The two other major rating agencies have preserved their evaluations of Russia’s national currency liabilities at the investment level BBB- (S&P lowered to the speculative level only Russia’s foreign currency rating - TASS)," the Finance Ministry said.
Putin says Russia will always find relevant responses to outside pressures
February 20, 23:29 UTC+3
Russian President also said the Russian Armed Forces was constantly perfecting its skills and seeking to match the toughest new requirements
MOSCOW, February 20. /TASS/. Russia will always find relevant responses to any external pressures, President Vladimir Putin said on Friday as he spoke at a gala concert on the occasion of Fatherland Defenders Day, which this country marks as a national holiday on February 23.
"No one should have any illusions that they can win military preponderance over Russia or put any kind of pressure on it, as we’ll always have appropriate responses to these acts of adventurism," Putin said.
"Our soldiers and officers have proved their capability for resolute, smooth, well-coordinate, professional, and courageous actions, for fulfilling the most complicated and unconventional tasks that any up-to-date, seasoned army with a high combat ability, deep-going traditions and a sense of military duty should be able to fulfill," he said.
He also said the Russian Armed Forces was constantly perfecting its skills and seeking to match the toughest new requirements, adding that much had been done in the past few years to improve the system of combat control.
"We’re successfully implementing a large-scale program of rearmaments in the Army and the Navy, with emphasis on the Air Force, space defence and nuclear forces," Putin said. "This is a guarantee of global parity of forces. We’ll continue doing everything in our power to build up the potential of the Armed Forces."
"I’d like to stress our willingness to fulfill our military construction plans under any circumstances," he said.
Putin added that the latter statement concerned in full measure the social issues of servicemen’s activity and well-being.
Russia’s former finance minister warns oil may briefly drop to 20 dpb
February 21, 3:18 UTC+3
Kudrin believes there are very many factors that keep putting downward pressures on oil prices
MAKHKACHKALA, February 21. /TASS/. Russia’s former finance minister, Aleksey Kudrin, does not rule out a brief drop in crude oil prices to 20 dollars per barrel.
In Friday’s trading on the London Intercontinental Exchange a barrel of Brent was trading at 60.41 dollars before the close. In January, Brent blend prices dropped as low as 48 dollar per barrel and even lower.
"I cannot rule out that at a certain point, for a very brief period, the price of oil may slump to 20 dollars," Kudrin told the media in Makhachkala on Friday. "I do not think most analysts agree this may last a while. At the moment the assumption is oil prices will be somewhere between 60 and 80 dollars per barrel this year. That the price is now back to 60 dollars says nothing at all. It may turn either way."
Kudrin believes there are very many factors that keep putting downward pressures on oil prices.
"For two or three year we shall see the world getting used to new prices and businesses evaluating the new opportunities. The world will realize at last what is the long-term price everybody will be prepared to agree to," Kudrin said.
The Russian government hopes that the oil price will stabilize at the current level, he recalled.
"Whenever I am asked for an opinion, I say that future prices are anyone’s guess. They may stay at 40 dollars per barrel for a long time, or they may be at 80 dollars," he concluded.
Earlier, Deputy Prime Minster Dmitry Medvedev said that in proposing adjustments to the budget the Cabinet of Ministers would proceed from a forecast price of 50 dollars per barrel. In that case the federal budget’s deficit will make up 3.8% of the GDP.
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