Q&A-Geopolitical risk key for Russia's ratings recovery - S&P
By Yumna MohamedLONDON, 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
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
To read more comments from Moritz Kramer from the GMF Fixed
Income Focus, see [nL9N1CD01I] and [nL9N1CD01J]
(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: https://forms.thomsonreuters.com/communities/)
(Editing by Hugh Lawson)
Keywords: RUSSIA RATINGS/S&P (Q&A)