Friday

19th Jul 2019

Russia bonds cut to 'junk', EU sanctions blamed

  • The news saw the ruble fall and bond yields climb (Photo: Alex F)

Rating agency S&P has cut Russian bonds to “junk” status in a move linked to EU sanctions, prompting angry rhetoric in Moscow.

The agency said in its note on Monday (26 January) Russian bonds are not worth buying because of low oil prices, the risk of more economic sanctions, and long-term Russian mismanagement.

Read and decide

Join EUobserver today

Support quality EU news

Get instant access to all articles — and 18 year's of archives. 30 days free trial.

... or join as a group

It said the downgrade “reflects a lack of external financing due to the introduction of economic sanctions and the sharp decline in oil prices”.

“We anticipate that asset quality in the financial system will deteriorate given the weaker rouble; restricted access of key areas of the economy to international capital markets due to sanctions; and economic recession in 2015”, it added.

“We do not currently expect that the government will be able to effectively tackle the long-standing structural obstacles (perceived corruption, the weak rule of law, the state’s pervasive role in the economy, and the challenging business and investment climate) to stronger economic growth”.

The Russian finance minister, Anton Siluanov, accused the US-based company of “exorbitant pessimism”.

“There’s no reason to dramatise the situation … there are no grounds for foreign investors’ withdrawing assets from Russia”, he told Russian media the same day.

Russian leader Vladimir Putin at a government meeting also on Monday noted his parliament will on Tuesday approve an "anti-crisis” plan in order to “ensure social stability”.

But the S&P news saw the value of the rouble and of Russian shares fall even further, while yields on Russian bonds due in 2023 went up to 7.3 percent.

Russia has a rainy day fund believed to be worth $380 billion.

But market watchers, such as Marlen Kruzhkov, a US-based lawyer who represents what he calls several Russian "oligarchs", say it could be quickly burnt up.

"It will disappear if Putin needs to bail out one or more of his big banks - just look at the amount of money Europe had to pump into its banking system during the [euro] crisis", he told EUobserver.

EU and US economic sanctions are designed to create “market uncertainty”.

They have so far blocked several Russian banks, energy firms, and arms suppliers from raising capital on international markets, making it harder for them to service their dollar-denominated debt.

US treasury chief Jack Lew and EU leaders have warned they are willing to increase the “strain” if Russia launches more attacks in east Ukraine.

"In view of the worsening situation we ask the upcoming Foreign Affairs Council [on Thursday] to assess the situation and to consider any appropriate action, in particular on further restrictive measures", EU leaders said in a joint statement agreed late on Monday.

But Russia remains defiant.

It said on Monday it is preparing a 12th “aid” convoy to Russia-occupied territories in east Ukraine - an exercise Western states say is used to supply Russia-controlled fighters and to smuggle home bodies of dead Russian soldiers.

The threats of more sanctions come after Russia-controlled forces fired rockets into the Ukrainian city of Mariupol at the weekend, killing 30 people.

Russian foreign minister Sergei Lavrov and its UN ambassador, Vitaly Churkin, said no one knows who did it.

Lavrov also continued to cast doubt on accusations the Russian side shot down flight MH17 in July 2014 - the last time the EU imposed economic measures.

“I can say that our Western partners and the Ukrainian authorities have developed a chronic habit of immediately pointing fingers at the militias and Russia no matter what happens”, he told press at a meeting with Israeli FM Avigdor Lieberman in Moscow.

“Such tragedies can be used to distort the truth, get ahead of the results of an objective investigation, ratchet up anti-Russian hysteria or justify the positions of a group of Western countries who want blood and more sanctions”, he added.

Referring to France and Germany as Russia’s “partners”, he said: “I hope that reason and objective, legitimate national interests will prevail”.

EU ministers to expand Russia blacklist

EU foreign ministers are keen to add names to the Russia blacklist and to launch counter-propaganda measures, according to draft conclusions seen by EUobserver.

Analysis

Who's next on the EU's Russia blacklist?

The EU’s next round of Russia sanctions is to be limited to blacklisting more names, with diplomats and kremlinologists helping EUobserver to identify potential targets.

EU discusses new sanctions on Turkey

EU diplomats have discussed which sanctions to slap on Turkey over gas drilling in Cypriot waters, amid Ankara's ongoing mockery of Europe.

Analysis

EU should stop an insane US-Iran war

"If Iran wants to fight, that will be the official end of Iran. Never threaten the United States again!", US president Donald Trump tweeted on Monday (20 May).

Stakeholders' Highlights

  1. UNESDAUNESDA reduces added sugars 11.9% between 2015-2017
  2. International Partnership for Human RightsEU-Uzbekistan Human Rights Dialogue: EU to raise key fundamental rights issues
  3. Nordic Council of MinistersNo evidence that social media are harmful to young people
  4. Nordic Council of MinistersCanada to host the joint Nordic cultural initiative 2021
  5. Vote for the EU Sutainable Energy AwardsCast your vote for your favourite EUSEW Award finalist. You choose the winner of 2019 Citizen’s Award.
  6. Nordic Council of MinistersEducation gets refugees into work
  7. Counter BalanceSign the petition to help reform the EU’s Bank
  8. UNICEFChild rights organisations encourage candidates for EU elections to become Child Rights Champions
  9. UNESDAUNESDA Outlines 2019-2024 Aspirations: Sustainability, Responsibility, Competitiveness
  10. Counter BalanceRecord citizens’ input to EU bank’s consultation calls on EIB to abandon fossil fuels
  11. International Partnership for Human RightsAnnual EU-Turkmenistan Human Rights Dialogue takes place in Ashgabat
  12. Nordic Council of MinistersNew campaign: spot, capture and share Traces of North

Latest News

  1. EU goes on holiday as new UK PM arrives This WEEK
  2. Survey: Half of EU staff 'don't know' ethics rules
  3. Von der Leyen signals soft touch on migrants, rule of law
  4. Timmermans: von der Leyen will be tough on rule of law
  5. Timmermans trolls 'idiot' Brexit negotiators
  6. Rudderless Europe: Will real Germany please stand up?
  7. PiS & Fidesz claim credit for von der Leyen victory
  8. Von der Leyen faces gender battle for commission posts

Stakeholders' Highlights

  1. Nordic Council of MinistersLeading Nordic candidates go head-to-head in EU election debate
  2. Nordic Council of MinistersNew Secretary General: Nordic co-operation must benefit everybody
  3. Platform for Peace and JusticeMEP Kati Piri: “Our red line on Turkey has been crossed”
  4. UNICEF2018 deadliest year yet for children in Syria as war enters 9th year
  5. Nordic Council of MinistersNordic commitment to driving global gender equality
  6. International Partnership for Human RightsMeet your defender: Rasul Jafarov leading human rights defender from Azerbaijan
  7. UNICEFUNICEF Hosts MEPs in Jordan Ahead of Brussels Conference on the Future of Syria
  8. Nordic Council of MinistersNordic talks on parental leave at the UN
  9. International Partnership for Human RightsTrial of Chechen prisoner of conscience and human rights activist Oyub Titiev continues.
  10. Nordic Council of MinistersNordic food policy inspires India to be a sustainable superpower
  11. Nordic Council of MinistersMilestone for Nordic-Baltic e-ID
  12. Counter BalanceEU bank urged to free itself from fossil fuels and take climate leadership

Join EUobserver

Support quality EU news

Join us