Moody’s said, as new sanctions may affect the rating of Russia

© AFP 2018 / Emmanuel DunandРейтинговое Moody’s. Archival photoMoody’s said, as new sanctions may affect the rating of Russia© 2018 AFP / Emmanuel Dunand

The tightening of U.S. sanctions against Russia will not lead to the downgrading of its sovereign rating, however, may cause deterioration of the Outlook to stable from positive, said in an interview with RIA Novosti, senior Vice President, senior analyst Moody’s sovereign rating of Russia Kristin Lindow.

«If there are tougher sanctions, we’ll probably take a break to view the actual impact on the credit profile of the country before raising the rating to investment level,» she said. However, according to her, the tightening of sanctions, as expected, will not result in the downgrade, however, the forecast can be revised from positive to stable.

Moody’s in January improved the Outlook for the rating of Russia from «stable» to «positive.» Simultaneously, the rating confirmed at the level «Ba1» — non-investment on the scale of the Agency.

Lindow explained that the current positive rating Outlook means the probability of «approximately 30% of what the rating will be changed in this direction», that is, elevated.

Russia sanctions will cope

Lindow considers that the Russian authorities will be able to cope with possible new sanctions by the USA through the same tools that were used in 2015, and because state finances are in a better position to withstand the new sanctions, for example, against the national debt.

According to her, in the last four years, Moscow has demonstrated its ability to cope with the sanctions. Over time their influence became less, and the Central Bank and the Finance Ministry «has adapted its policy to counter sanctions.» Now the question is whether to impose additional sanctions, and whether the long-term consequences from them. «Most likely, as with previous sanctions, they will have a big impact in the short term, and then it will gradually decrease», — said Lindow.

«Less likely secondary sanctions with sanctions, prohibiting state banks to make dollar operations. Such sanctions can have a greater impact in the short term, but the government is developing measures that can reduce their impact. More severe sanctions, like these, will require additional preparation by the government. More serious sanctions could have a lasting impact — within three to five years,» says senior Vice President of Moody’s.

According to Lindow, the US government realized that their actions «will inadvertently have an impact on the countries of Western Europe and their trade» and that these measures are «too destructive for the economy of these countries, not just Russia.»

Thursday at the conference Moody’s Lindow reported that the Agency in the absence of sanctions or changes inside the country could increase the rating of Russia to investment level in 2019.

The Russian stock market and the ruble came under pressure in April and August, after the U.S. decision to impose additional sanctions against Russia. A group of senators in the summer submitted a draft law, including sanctions against Russian public debt and state-owned banks. In the list of possible defendants — VEB, Sberbank, VTB and Bank of Moscow, Gazprombank, Rosselkhozbank, and Promsvyazbank.

Moody’s said, as new sanctions may affect the rating of Russia© Vitaly Podicipedidae