Fitch International Rating Agency Downgrades Russia's Credit Rating

Following the drop in oil prices and the unrest in Ukraine, which has exacerbated the worst currency crisis in Russia in 16 years, the international credit rating agency Fitch has downgraded Russia's credit rating. Fitch, one of the most reputable credit rating agencies in the world, announced on Friday that it has lowered the financial credibility of the Russian government to a "BBB" rating. In addition to this new rating, the agency has outlined a negative outlook for Russia, adding that the economic outlook for Russia has significantly declined since mid-2014 and is likely to continue until 2017. This downgrade has been met with reactions from Russian officials. An unnamed Russian government official, in an interview with the Russian news agency Interfax, described Fitch's decision as politically motivated, stating that there is no economic evidence to justify this decision. The agency "Standard & Poor's" also downgraded Russia's credit rating to BBB about eight months ago, in April of last year. Russia, which is considered one of the major energy exporters in the world, has faced sanctions from the U.S. and the European Union following its annexation of Crimea. The drop of at least 50% in oil prices, combined with these sanctions, has placed Russia on the brink of economic recession. Fitch has stated that the sanctions will continue to negatively impact the Russian economy by blocking Russian banks and preventing Russian companies from accessing foreign capital markets. Additionally, the penalties for violating sanctions have discouraged investors from engaging in stock and bond transactions with the ruble. In response to the severe drop in its currency, Russia has taken emergency measures, including the Central Bank spending about $88 million last year to support the national currency, the ruble. The Russian government has also instructed its largest state-controlled exporters to convert most of their foreign earnings into rubles and announced plans to inject $17 billion into Russian banks using domestic bonds.