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Q&A-Geopolitical risk key for Russia's ratings recovery - S&P
June 20, 2017 / 2:47 PM / in 6 months

Q&A-Geopolitical risk key for Russia's ratings recovery - S&P

LONDON, June 20 (Reuters) - When Standard and Poor’s raised Russia’s sovereign outlook to positive from stable in March, the ratings agency said it was expecting growth to improve as the country emerged from a two-year recession.

Moritz Kraemer, S&P’s chief of sovereign ratings, told the Global Markets Forum on Tuesday that geopolitical risk and ensuing sanctions regimes imposed on Russia played an important role in the country’s previously lower ratings and were still key factors to watch. He also shared his ratings outlook for other regions.

Here are excerpts from the conversation:

Q: Russia is the only country you rate with a BBB- rating and positive outlook. Has the threat of new U.S. sanctions on Russia altered your view at all?

A: Any renewed deepening of geopolitical risks could diminish the chances of an upgrade. This is because the consequences of a tightening sanctions regime might choke off the recovery of the Russian economy with fiscal but also potential political risks.

Q: The oil price has stumbled back again too, so if we put it all together is the positive outlook still justified there?

A: Yes, we think the positive outlook on Russia remains justified. What we have observed is an economic recovery that is surpassing our expectations and we have also seen progressive improvement in the Russian financial system strengthening the intermediation and effectiveness of monetary policy.

Q: With the rising tensions in the Middle East, are there risks of a few downgrades there?

A: The Middle East has been one of the weakest regions in recent years as far as sovereign ratings are concerned. Much is explained by terms of trade shock with weaker oil prices but you also have increasing pressure on public finances in a number of GCC sovereigns which require uncomfortable choices for policymakers. This can put pressure on the social contract and lead to broader instability.

Q: Is there a risk of another wave of rating cuts?

A: We do not see a wave of downgrades in the Middle East, but there are individual countries with a negative rating outlook. Among them is Qatar but also sovereigns like Oman, which we already lowered to non-investment grade, similar to Bahrain.

To read more comments from Moritz Kramer from the GMF Fixed Income Focus, see and (This interview was conducted in the Reuters Global Markets Forum, a chat room hosted on the Eikon platform. For more information on the forum or to join the conversation, follow this link: here) (Editing by Hugh Lawson)

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