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Russia: US behind S&P move

January 27, 2015

Russian politicians have brushed off ratings agency Standard & Poor's downgrade of the country's debt, calling the decision politically motivated. Sanctions and falling oil prices have hit Russia's economy and the ruble.

Russland Pipeline
Image: picture alliance/Photoshot

Politicians in Russia on Tuesday sought to shrug off the country's credit rating downgrade by agency Standard & Poor's (S&P) the previous evening. Russian sovereign debt was reclassified by S&P as BB+, its highest rating that is also considered non-investment grade - also known as "junk."

"I personally have no doubt that this was done not even on the prompting, but on direct orders from Washington," Deputy Foreign Minister Vasily Nebenzya was quoted as saying by the RIA Novosti news agency. "Russia faces coordinated actions to undermine its economy. These actions are a covert part of the sanctions war which has been declared against us pretty much officially."

Russia faces a string of western sanctions, from the EU and the US, targeting individuals and certain sectors of the economy. Russia's banks, financial businesses, arms companies and certain oil industry businesses are among those affected. On Tuesday, European foreign ministers raised the specter of further restrictive measures, saying a decision would be taken at the EU's next summit on February 12.

Sanctions biting, more up for discussion

The call followed intensified fighting in eastern Ukraine, especially in the city of Mariupol at the weekend, after pro-Russian separatist fighters said that they would no longer observe a fragile truce first agreed in September. Russian's Nebenzya also alluded to this in his reactions on Tuesday.

"The fact that this step [S&P's downgrade] has been taken now is not surprising: by strange coincidence it came during a fresh spike in anti-Russian hysteria," the deputy foreign minister said.

Vladimir Putin's spokesman, Dmitry Peskov, similarly said that the downgrade was "politically motivated," claiming that "wise companies" would therefore pay little heed to the change in status.

Plan to help faltering economy

In Moscow, Finance Minister Anton Siluanov on Tuesday unveiled a special plan designed to stop the economic slide. The package included a freeze on government spending, and the target of restoring an annual budget surplus by 2017. Siluanov criticized S&P for being too pessimistic, also saying that it was unfortunate that the agency acted before learning of these measures.

The Russian currency dipped lower, to a price of 68.1 rubles per US dollar, on Tuesday morning, before rebounding somewhat into the high 67s. One year ago, the rate stood below 35 rubles; Russia's currency has shed half of its value against the dollar in the past 12 months.

Last week, fellow ratings agency Moody's downgraded Russian sovereign bonds, saying that a further dip into "junk" territory was possible in the near future.

As well as the sanctions and their impact on the Russian currency, tumbling global oil prices have also hurt the major exporter of fossil fuels. A barrel of Brent crude was selling for $47.95 on Tuesday; last July, the same barrel would have fetched more than $110.

Despite its current difficulties, Russia's national debt is very low, at around 11 percent of the country's annual economic output.

All three major credit ratings agencies - Moody's, S&P and Fitch - operate globally but are headquartered in the US. Fitch has head offices in both New York and London.

msh/ng (AFP, AP, Reuters)