waltermasoni
Caribbean Trader
The 'C' rating reflects Fitch's view that a sovereign default is imminent.
This rating action follows our downgrade of the Long-Term Foreign-Currency IDR to 'B'/Rating Watch Negative on 2 March, and developments since then have, in our view, further undermined Russia's willingness to service government debt.
This includes the Presidential Decree of 5 March, which could potentially force a redenomination of foreign-currency sovereign debt payments into local currency for creditors in specified countries. In addition, the application of Central Bank of Russia regulation has restricted the transfer of local-currency OFZ debt coupons to non-residents since late last week.
More generally, the further ratcheting up of sanctions, and proposals that could limit trade in energy, increase the probability of a policy response by Russia that includes at least selective non-payment of its sovereign debt obligations.
To a lesser extent, the risk of imposition of technical barriers to servicing debt, including through the direct blocking of transfer of funds, or through clearing and settlement systems, have also risen somewhat since our last review.
The lowering of the Country Ceiling to 'B-' reflects the expected impact of capital controls in impeding transfer and convertibility. The differential to the Long-Term IDRs is due to the potential for a degree of selective enforcement of capital controls or the potential ability for some entities to make payments.
ESG - Governance: Russia has an ESG Relevance Score (RS) of '5' for both Political Stability and Rights and for the Rule of Law, Institutional and Regulatory Quality and Control of Corruption, as is the case for all sovereigns. These scores reflect the high weight that the World Bank Governance Indicators (WBGI) have in our proprietary Sovereign Rating Model. Russia has a low WBGI ranking at the 29th percentile reflecting relatively weak rights for participation in the political process, weak institutional capacity, uneven application of the rule of law and a high level of corruption. Russia has an ESG Relevance Score of '5' for International Relations and Trade reflecting the detrimental impact of sanctions. Russia also has an ESG Relevance Score of '5' for Creditor Rights due to very weak willingness to service and repay debt
This rating action follows our downgrade of the Long-Term Foreign-Currency IDR to 'B'/Rating Watch Negative on 2 March, and developments since then have, in our view, further undermined Russia's willingness to service government debt.
This includes the Presidential Decree of 5 March, which could potentially force a redenomination of foreign-currency sovereign debt payments into local currency for creditors in specified countries. In addition, the application of Central Bank of Russia regulation has restricted the transfer of local-currency OFZ debt coupons to non-residents since late last week.
More generally, the further ratcheting up of sanctions, and proposals that could limit trade in energy, increase the probability of a policy response by Russia that includes at least selective non-payment of its sovereign debt obligations.
To a lesser extent, the risk of imposition of technical barriers to servicing debt, including through the direct blocking of transfer of funds, or through clearing and settlement systems, have also risen somewhat since our last review.
The lowering of the Country Ceiling to 'B-' reflects the expected impact of capital controls in impeding transfer and convertibility. The differential to the Long-Term IDRs is due to the potential for a degree of selective enforcement of capital controls or the potential ability for some entities to make payments.
ESG - Governance: Russia has an ESG Relevance Score (RS) of '5' for both Political Stability and Rights and for the Rule of Law, Institutional and Regulatory Quality and Control of Corruption, as is the case for all sovereigns. These scores reflect the high weight that the World Bank Governance Indicators (WBGI) have in our proprietary Sovereign Rating Model. Russia has a low WBGI ranking at the 29th percentile reflecting relatively weak rights for participation in the political process, weak institutional capacity, uneven application of the rule of law and a high level of corruption. Russia has an ESG Relevance Score of '5' for International Relations and Trade reflecting the detrimental impact of sanctions. Russia also has an ESG Relevance Score of '5' for Creditor Rights due to very weak willingness to service and repay debt
