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In the latest blow to President Vladimir Putin, a major investor rating service has slashed Russia’s credit rating as his aggression toward neighboring Ukraine has resulted in severe collateral damage to his own country’s economy.
On Sunday, Moody’s downgraded its rating on Russia to Ca, a miserable designation that is the second-lowest on its list, which describes bonds “that are likely in, or very near default,” as sanctions make the economy scream, the ruble plummets in value, the stock market is shuttered and foreign corporations pull their services from the country.
Moody’s said that the decision was “driven by severe concerns around Russia’s willingness and ability to pay its debt obligations”.
Since Putin ordered his tanks, troops and planes across the Ukrainian border, the international condemnation has included the harshest economic punishments ever brought against a major country including freezing overseas assets of the Russian central bank as well as booting a number of Russian banks off of SWIFT, the planet’s main international payments system.
In addition to the sanctions which Putin has suggested are an act of war, multinational corporations have also pulled their services from Russia, most notably VISA and Mastercard, both of which suspended their operations in the country in a move that was announced on Saturday following a plea from Ukrainian President Volodymyr Zelenskyy who implored companies to pull the plug during a call with U.S. lawmakers.
Visa, Mastercard ‘immediately’ suspend operations in Russia over unprovoked Ukraine invasion https://t.co/cmtKfzHqP4 pic.twitter.com/FoG801TFHw
— Conservative News (@BIZPACReview) March 6, 2022
“Moody’s said default risks had increased, and that foreign bondholders were likely to recoup only part of their investment,” Reuters reported. “The likely recovery for investors will be in line with the historical average, commensurate with a Ca rating,” it said. “At the Ca rating level, the recovery expectations are at 35 to 65% (of face value)”
Russia’s credit was also downgraded by S&P Global which on Friday slashed the country’s credit for the second time in a week, “stating that recent capital controls measures are increasingly likely to cause a default,” according to The Wall Street Journal.
“The sovereign is now rated CCC-, for both its local-currency and dollar debt. That is two notches above a default level,” the WSJ reported. “A week ago, Russia was rated investment grade. The speed of its descent into the deepest levels of junk status is unprecedented, according to an S&P spokesperson.”
“The downgrade follows the imposition of measures that we believe will likely substantially increase the risk of default,” S&P Global said in its ratings report released Friday. “Among these are capital controls introduced by authorities that aim at shielding the ruble from the impact of severe economic sanctions while preserving remaining useable reserve buffers,” Business Insider reported.
Economic sanctions have already had a severe effect on Russia but have yet to influence Putin to call off hostilities in Ukraine and bring his forces back home to a country that has incurred grave financial damage since they left.
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