While Russia continues its crushing military attack on Ukraine, the sanctions and financial penalties the United States, their European allies, and other nations have been hitting Russia with are taking their toll.
Moody’s rating agency has set Russia’s long-term debt rating to Ca. That is the second-lowest rung a country can be at, and it means there are legitimate concerns that Russia has both the ability and willingness to pay its debt obligations.
Here’s part of a statement from Moody’s.
“The likely recovery for investors will be in line with the historical average, commensurate with a Ca rating. At the Ca rating level, the recovery expectations are at 35 to 65% (of face value).”
The only rating level below Ca is C,
Translation; the county is in danger of default, and the lowered credit rating could push Putin to seek any and all other sources of capital to keep the economy going.
Since Vladimir Putin sent his troops and missiles into their neighboring country, the free world has united in punishing Russia economically. The ruble has dropped 20% in value in the past week. Russia has closed its stock market because of a legitimate fear of a sell-off that could crush the Russian economy.
Russia’s finance ministry announced something interesting on Sunday related to their lowered credit rating. Regarding sovereign bond payments owed to non-residents, the ministry said it would pay the debts in full and on time, but the payments would depend on the sanctions that Western governments have placed on Russia. So, in other words, if money is owed to countries that have imposed sanctions, Russia has threatened that they might not make the payments which could lead to technical defaults of tens of billions of dollars of Eurobonds.
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