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S&P Assessed the Impact of New US Sanctions on Russia's Creditworthiness
August 23, 2019 11:04

New US sanctions will not affect Russia's creditworthiness, S&P analysts say. At the same time, they do not exclude the risk of   introducing more stringent restrictions by Washington.

US sanctions over the Skripals case, which have been introduced recently, will not directly affect Russia's creditworthiness, according to the S&P rating agency release. Analysts pointed out that the “strong budget indicators”, the limited need for government borrowing (about 1.5% of GDP annually) and the “significant balances” of funds in the accounts of the Federal Treasury would help the Russian authorities cope with the negative consequences of the new sanctions.

The agency emphasized that sanctions do not limit the access of US financial institutions to the secondary market of sovereign debts of Russia and do not apply to borrowings of Russian state corporations and financial institutions. Russia's foreign currency debt, although it is mainly denominated in dollars, is small (2.5% of GDP), and the total share of Russian Eurobonds held by non-residents is decreasing, which also limits the negative impact on the balance of payments, the report said. In addition, the Russian government mainly borrowed funds in national currency, and domestic demand for OFZs is quite high and can replace demand from non-residents, analysts concluded.

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At the same time, S&P notes that the risk of introducing more stringent sanctions against Russia remains: the forecast on this score "remains extremely uncertain." In particular, the agency cannot assess whether US sanctions will lead US investment banks to exclude Russian securities from the calculation of the bond index. This could increase the cost of capital for Russia, follows from the release.

The introduction of new sanctions due to an attempt in the UK on the GRU ex-employee and British spy Sergey Skripal, was confirmed by the US State Department on August 3, 2019. American financial institutions were banned from acquiring Russian non-ruble government debt at initial offerings and   issuing loans to Russian ministries, agencies and sovereign funds. In addition, the United States announced that it would impede the provision of assistance to Russia by international organizations and tighten the rules for the supply of goods and technologies to Russia.

Russia denies involvement in Skripal poisoning.

Author: Anna Dorozhkina

Tags: Russian economy Russian business Russian companies   

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