S&P Global downgrades Russia’s credit rating for the 2nd time in a week as major rating agencies cut the country deeper into junk territory

• S&P Global Ratings cut Russia’s sovereign credit rating to CCC- on Friday, another downgrade following its invasion of Ukraine. 
• The agency said Russia is at greater risk of default due to capital controls the country put in place to keep money in the country. 
• Moody’s and Fitch also slashed their ratings on Russia to junk this week. 

S&P Global Ratings downgraded Russia’s credit for the second time in a week on Friday, saying the recent implementation of capital controls in the midst of its invasion of Ukraine increases the risk of default.

The sovereign rating on foreign and local currency debt fell to CCC- from BB+. The agency dropped the rating out of investment-grade to BB+ on February 26 after Moscow launched its assault on the former Soviet republic. 

Russia this week continued to clamp down on capital flight taking place after Western countries placed sanctions against the country for its military strike. 

“The downgrade follows the imposition of measures that we believe will likely substantially increase the risk of default,” S&P Global said in its ratings report released Friday. “Among these are capital controls introduced by authorities that aim at shielding the ruble from the impact of severe economic sanctions while preserving remaining useable reserve buffers.” 

Russia’s central bank this week imposed limits on the ability of foreigners to move money out of the country and banned coupon payments to overseas holders of Russian bonds. Money transfers have been banned until March 31 for individuals or companies based in countries that placed sanctions on Russia, news outlet Vedomosti reported Wednesday. 

“We estimate that international sanctions have reduced Russia’s available foreign exchange reserves by as much as one half, including foreign currency deposits and securities domiciled in the U.S., the EU, and Japan,” said S&P Global. “This has substantially weakened Russia’s external liquidity during a period of rising foreign currency demand.” 

Russia’s credit ratings were slashed to junk by Moody’s Investors Service and Fitch Ratings this week. Both agencies reduced their ratings by six notches as they foresee a high risk of default. Moody’s move put Russia’s rating at B3, and Fitch went to a single-B rating.