There are No Reasons for Downward Revision of Russia’s Rating

On October 24, the Standard & Poor's Rating Agency is going to revise Russia's sovereign rating.

The latest update of Russia's rating was carried out by the above agency in April 2014 when it was downgraded from «ВВВ» to «ВВВ-» in foreign currency. The S&P explained that by limitation of the access to foreign financial markets due to sanctions and the outflow of capital.

Taking into account the latest trends, it is expected that on October 24 the S&P rating agency may decide to revise Russia's rating further downwards. At the same time, in terms of the long-term rating of financial stability as regards Russia's ability to repay its foreign obligations there are no reasons for downward revision of Russia's rating.

Decision on downward revision of the rating of the Russian Federation will sooner reflect the general fact of growth in any risks related to Russia.

It is worth mentioning that revision of the rating automatically results in downgrade of all the companies' ratings as they cannot be higher than the country rating. Consequently, all the domestic companies' ratings will go down. However, in conditions of sanctions Russian companies do not have anyway an opportunity to enter international markets and borrow funds there.

Generally, the very fact of downward revision of Russia's rating is unlikely to have serious consequences because domestic companies cannot borrow anyway on international markets.

Sergei Drobyshevsky, Academic Director