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Fitch: Russia’s debt threatens severe sanctions

The imposition of new and possibly severe sanctions against Russia could have a negative impact on the credit rating of the country and its banking sector, the rating agency Fitch said on Tuesday, in response to the growing threats of the West for the consequences of a possible Russian invasion. in Ukraine. At the same time, S&P warns that possible sanctions could increase the country’s financing costs.

“Our main assessment is that the new sanctions will not be severe enough to justify a manual assessment, but that risk has increased in recent weeks,” Fitch was quoted as saying by Reuters.

At the same time, regarding banks, Fitch points out that “the greatest impact on the creditworthiness of the banking sector is related to whether the sanctions will damage the ability of large state-owned banks to make payments in foreign currency, especially a ban on trading in dollars.”

The measures that will have the greatest impact on the credit rating, according to Fitch, will be the banning of systemic banks and businesses from trading in US dollars or the lifting of access to the international payment system or broad-based energy market sanctions. disrupt exports.

It is noted that among the sanctions that the West is considering for Russia are the suspension of the Nord Stream 2 gas pipeline, the removal of the country’s access to the global electronic procurement system, but also sanctions against Russian banks and individuals.

Fitch is currently rating Russia with a “BBB” with a “stable” outlook, while the country is receiving a similar credit rating from Moody’s and S&P.

For its part, S&P warns that the sanctions in question are tougher than those imposed after Russia annexed Crimea in 2014 and therefore have potentially more serious macroeconomic consequences.

“Potential restrictions on non-residents holding Russian government bonds on the secondary market could increase the indirect cost of government financing, but their impact on fiscal and macroeconomic stability will initially be modest,” the S&P said in a statement. of the country and its lenient financing plans.

Source: Capital

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