S&P Downgrades Russia’s Credit Rating to Junk

S&P Downgrades Russia’s Credit Rating to Junk

S&P Downgrades Russia’s Credit Rating to Junk


S&P Downgrades Russia's Credit Rating to Junk

Standard & Poor’s Headquarters. Image credit: B64 at en.wikipedia [CC BY 3.0]

US-based credit rating agency Standard & Poor’s has cut Russia’s sovereign rating to BB+, leaving it below investment grade for the first time in a decade. Moscow termed the decision “overly pessimistic.”

“The downgrade reflects our view that Russia’s monetary policy flexibility has become more limited and its economic growth prospects have weakened. We also see a heightened risk that external and fiscal buffers will deteriorate due to rising external pressures and increased government support to the economy,” said a statement from the agency.

The ruble fell from 66.3 to over 69 per dollar. As it experienced downward pressure through the early hours of Monday, the Russian currency has now fallen by over 8 percent since the previous trading day.

Russia’s Finance minister Anton Siluanov said S & P’s move was “overly pessimistic, and did not take into account the strengths of the Russian economy.” Among its advantages he listed Russia’s considerable foreign currency reserves, a positive balance of payments, and low levels of state debt. The official urged investors to “avoid dramatizing the situation.

In contrast, in their breakdown, S&P analysts drew up a bleak future for Russia’s economy, which is predicted to shrink this year.

“We project that the economy will expand by about 0.5% annually in 2015-2018, below the 2.4% of the previous four years,” says the report.

READ MORE: Russian Central Bank voids Standard & Poor’s, Moody’s, Fitch ratings

It blames both the “structural problems” of Russia’s economy, and the cycle of Western sanctions and counter-sanctions imposed since the succession of Crimea from Ukraine last March.

“We see this muted projected growth partly as a legacy of a secular economic slowdown that had already begun before the recent developments in the Ukraine. It also reflects a lack of external financing due to the introduction of economic sanctions and the sharp decline in oil prices.”

The fall in credit ratings makes it more difficult for Russia to borrow money on the international markets, and may have wider ramifications for its financial system. Russian companies, both state-owned and otherwise, may struggle to repay their loans, while many investors without a remit to speculate in risky conditions may withdraw from the Moscow stock markets.

The government may have to step in to rescue key national corporations. The Russian Central Bank has promised to inject 1.2 trillion rubles (US$18 billion) into the country’s banking system to steer away from a full-fledged crisis.

“Credit ratings are meaningless in a situation when the international capital markets are closed off to Russian companies,” said a statement from oil and gas giant Rosneft, one of the companies targeted by sectoral sanctions adopted against Russia in the summer over the escalation of the conflict in Ukraine. Majority state-owned Rosneft insisted it was feeling “confident.”

Russia’s Central Bank announced last week that in its internal assessments it would ignore any ratings issued by the Big Three Western ratings agencies – Standard & Poor’s, Fitch, and Moody’s – that were issued after March 2014.

It said that all credit ratings given to Russian companies and banks will now be at the discretion of the board of directors of the bank. The regulator will assess whether or not the ratings made after March are accurate. The decision came after Fitch and Moody’s had downgraded Russia’s sovereign debt to just above junk status.

Read more

Posted by Red Pill Reports in Economic News
Russia’s Modest Proposal To Greece: “Exit Europe And We Will Lift The Food Import Ban”

Russia’s Modest Proposal To Greece: “Exit Europe And We Will Lift The Food Import Ban”

Russia’s Modest Proposal To Greece: “Exit Europe And We Will Lift The Food Import Ban”

By Tyler Durden | Zero Hedge

Russia's Modest Proposal To Greece: "Exit Europe And We Will Lift The Food Import Ban"

Image credit: Public Domain

It has not been a good week for Greece: first we learned that its treasury has run dry as Greece have stop paying all taxes ahead of the elections (and likely after), making further reforms virtually impossible as the government simply does not have the cash to promote economic changes; then we found out that first two then all four of the largest Greek banks have submitted Emergency Liquidity Assistance requests to the ECB to preserve liquidity in light of a deposit run that is picking up pace. And yesterday, adding insult to injury, Spiegel leaked that while seeking preapproval from Merkel for his QE program to be announced next week, Draghi told the Germans that Greek bonds won’t be among the securities monetized by the ECB.

It almost makes the Greeks wonder what’s the point of staying in the Eurozone and keeping the Euro if all it leads to is 50% youth unemployment, 25% total unemployment, and unprecedented pain and suffering as a result of the internal devaluation that will continue indefinitely since Greece, courtesy of the Euro, is unable to engage in an external one.

Of course, the Greek population will be able to voice its opinion next Sunday when it holds general elections, which will almost surely be won by Tsipras who has threatened on numerous occasions to renegotiate the Greek bailout, something Germany has made quite clear is not a topic for debate, and that a Grexit is assured if Greece thinks it can hold Europe hostage with threats of Eurozone collapse.

And just to make things interesting, overnight Russia told a beleaguered Greece, and specifically its hurting farmers, that it “may lift its ban on food imports from Greece in the event it quits the European Union” according to Russian Minister of Agriculture Nikolai Fyodorov who spoke in Berlin on Friday.

If Greece has to leave the European Union, we will build our own relations with it, the food ban will not be applicable to it,” Fyodorov said as reported by Tass.

In other words, Russia has casually thrown out feelers to Greece (and any other peripheral European country) and given it the option of joining the greater Russian sphere of influence (because the USSR 2.0 and satellites is still not trademarked), should it decide that 5 years after the first Greek “bailout” things for the country caught in an endless depression are as good as they will get with a bunch of Goldman bankers in charge.

Fyodorov also said that European Union countries, which felt discomfort from the slump in proceeds from exports of foods to Russia, were asking Russia to cushion the impacts of the Russian food import ban by expanding other types of imports. “We are looking at such possibility,” he said, adding that these countries offer new formats of cooperation in those areas that are not covered by the Russian food sanctions.

One such format apparently is the “hint” that should the European Union finally implode after years of kicking the can, then Russia will be more than happy to pick up the pieces.

Insanity? Perhaps, but just 48 hours ago crazier things happened, when a central bank which until Monday telegraphed the rock solid determination of its monetary policy not to mention the Swiss Franc’s floor, shocked the world when it became the first western bank to admit defeat in currency wars which have cost it a balance sheet the size of its GDP.

The ball is now in Greece’s court.


Posted by Red Pill Reports in World News