Chronicles of a ‘shattered economy’? Russia’s sovereign rating rises


MOSCOW, Russia – Credit rating agency Moody’s again upgraded Russia from a Ba1 to Baa3 ranking. Why is this US agency losing all its arguments against Russia’s increasing rating?

With the rating upgraded, Russia achieved an investment grade rating in accordance with Moody’s rating. This decision reflects the positive impact of policies undertaken in recent years to strengthen the country’s public finances and reduce Russia’s vulnerability to external shocks, Moody’s said.

In particular, with its effective policy, the Russian authorities have been able to contain the economic and financial impacts created by “falling oil prices” and “imposing sanctions” by Western countries.

However, there is still the possibility that the US Congress will impose new sanctions in the coming months. The new restrictions may include bans on US entities from trading securities issued by Russian state-owned banks.

At the same time, the agency’s analysts stress that Russia’s well-being continues to depend, albeit modestly, on the dynamics of oil price growth and geopolitical tensions.

Dmitri Lekukh recalled that Donald Trump recently tried to pressure Russia and Saudi Arabia into the oil market. The US president believed that both countries could manipulate oil prices through organizations such as OPEC.

The Russian journalist pointed out that “manipulating oil prices”, as Trump said, and “depending on them”, as Moody’s believes, are “two completely different things.”

- Advertisement -

In addition, Lekukh recalled the words of Russia’s Minister of Economic Development, Maksim Oreshkin, about Moody’s new rating. According to him, the agency has revised Russia’s credit rating because it has exhausted all but the most fantastic arguments against Russia’s rating increase.

In recent years Russia’s sovereign ratings have remained stable, or has even have grown a bit, but these indicators are not in any way reflected in the activity of foreign investors, says the author of the article stressing that although “money flows in the Russian economy” direct investments are channeled primarily to the real sector of the Russian economy. However, Moody’s or other agency ratings have nothing to do with direct investments in certain projects.

According to Lekukh, in the real sector there are other mechanisms that help investors to make and make decisions. The ratings of international credit agencies can only influence the portfolios of speculators.

In addition, the experience acquired after the introduction of “terrible sanctions” in the past teaches that “Russia has already adapted” to Western restrictions.

“These assessments of Russia’s so-called ‘destroyed economy’ are welcome, but the goals of the Russian economy and international rating agencies are different, so it is not Moody’s or Fitch’s mission to assess the achievement of these goals,” concludes Lekukh.

Subscribe to our newsletter
Sign up here to get the latest news, updates and special offers delivered directly to your inbox.