Moody's Investor Service has downgraded the Government of Russia's long-term issuer (local- and foreign-currency) and senior unsecured (local- and foreign-currency) debt ratings to Ca from B3, with a negative outlook.
The downgrade of Russia's ratings was triggered by Moody's expectation that capital controls by the Central Bank of Russia (CBR) will restrict cross border payments including for debt service on government bonds.
The downgrade to Ca is hence driven by severe concerns around Russia's willingness and ability to pay its debt obligations. Moody's view is that the risk of a default occurring has significantly increased and that the likely recovery for investors will be in line with the historical average, commensurate with a Ca rating.
The negative outlook reflects the significant risks to macro-economic stability posed by the imposition of severe and co-ordinated sanctions following Russia's invasion of Ukraine and the financial ramifications from delays to sovereign debt repayments and banking and corporate sector stress that are likely to have negative feedback loops for macro stability.
