S&P cuts Russian rating to ‘junk’ as Microsoft halts sales

By Raffaele Redi

Second downgrade in a week follows imposition of economic and financial measures by NATO

A residential building damaged by enemy action in Ukraine                                 
Governments and corporates are increasingly imposing financial sanctions on Russia due to attacks in Ukraine – Photo: Shutterstock

Rating agency S&P cut its Russian rating to junk on “increasing risk of default”, indicating that it could further lower the sovereign credit rating.

The agency lowered its long-term foreign and local currency sovereign credit ratings on Russia to CCC– from BB+ and BBB–, respectively, and kept them on CreditWatch with negative implications.

The downgrade follows the imposition of economic and financial measures by NATO that could “substantially increase the risk of default”.

“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,” said S&P.

Russian reserves

The move follows similar interventions by Fitch and Moody’s agencies, all estimating that international sanctions have more than halved Russia’s available foreign exchange reserves. Approximately 60% of Russian reserves in foreign currency deposits, securities and gold are domiciled in the US, the EU and Japan.

“This has substantially weakened Russia’s external liquidity during a period of rising foreign currency demand,” said S&P. “The sanctions also imposed restrictions that deny or significantly diminish access of the Russian banking system to the global financial system, markets, and infrastructure.”

Microsoft stops sales; Ikea closes stores

Alongside agencies lowering their Russian rating, more and more corporates are temporarily calling a halt to sales in Russia.

The list of retail giants either halting their sales or limiting their services to the Russian Federation is growing. Earlier this week Nike and Apple took action. Microsoft and Ikea have since announced suspensions.

“Like the rest of the world, we are horrified, angered and saddened by the images and news coming from the war in Ukraine and condemn this unjustified, unprovoked and unlawful invasion by Russia,” said Microsoft announcing the halt.

“We continue to work proactively to help cybersecurity officials in Ukraine defend against Russian attacks, including most recently a cyberattack against a major Ukrainian broadcaster,” Microsoft added.

Ikea, which has donated €20m (£16.5m) to Ukraine relief, also issued a statement saying its decision will affect 15,000 IKEA co-workers who will remain supported by the company.

Ukraine vice-president asks Samsung to suspend services to Russia

In light of the increasing support from NATO-nation-based corporates, Ukraine vice-president Mykhailo Fedorov asked the South Korean conglomerate group Samsung to stop supplying its services and products to the Russian Federation.

Fedorov appealed for it to restrict the country’s access to Samsung Pay, Samsung Galaxy Store and the Samsung Shop.

“We believe that such actions will motivate the youth and active population of Russia to proactively stop the disgraceful military aggression,” stated Fedorov in his letter.

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