Russia Earns Investment-Grade Rating From Moody's

Published: 11 February 2019
Russia's finance ministry vowed further action to entice fresh capital after Moody's Investors Service joined two other companies in raising the country's credit rating to investment grade.

Moody's lifted Russia's rating to Baa3 from Ba1 on Friday, putting the energy giant on par with Italy, South Africa and Hungary. S&P Global Ratings had upgraded the nation from junk last year, bringing it in line with Fitch Ratings.

In 2015, Russia was downgraded to junk by Moody's as a slump in crude and foreign sanctions drove the economy into its longest recession this century. Oil prices have now recovered, and the nation has returned to fragile growth, though the restrictions haven't been lifted and the U.S. has threatened to implement more.

"The fact that three agencies have assigned investment grade to Russia will be an additional positive argument for investors that consider the possibility of capital investments in our country," Finance Minister Anton Siluanov said in a statement. "The Russian government, on its part, will create new conditions for a further improvement of the rating."
President Vladimir Putin's government passed legislation last year to increase the retirement age for the first time in Russia's post-Soviet history, and it also pushed through an increase in the value-added tax that took effect Jan. 1. The measures will add to Russia's efforts to build up reserves and diversify currency holdings as a buffer against possible new U.S. sanctions.

New measures by the Trump administration could "be contained without material damage to the country's credit profile," according to Moody's.

"The sovereign's vulnerability to such shocks has indeed materially diminished, and no longer constrains the rating to sub-investment grade," it said.

"Moody's decision could lead to big inflows," said Ilya Feygin, senior strategist at WallachBeth Capital LLC in New York. "Moody's recognized that Russia has cleaned up a lot of stuff internally. Russia's not in a situation where a downturn in oil prices will completely crash Russia and make it unable to pay its bills. There is a chance that Russia will outperform EM short to medium term."