Fitch warns Russia that default is ‘imminent’

Rating agency Fitch downgraded Russia’s rating again on Tuesday, a decision that means the risk of a default on the country’s sovereign debt is, in its view, “imminent”.

Fitch, like other major rating agencies, in early March placed Russia’s long-term debt in the risk category of non-payment.

And the agency decided to lower the rating again from “B” to “C”, due to the development of events “which undermined Russia’s willingness to pay public debt.”

The lower this score, the less confidence the creditors have in the country and the less chance it has of raising money at reasonable interest rates.

To justify its decision, Fitch cited a March 5 presidential decree allowing Russia to pay creditors of some countries in rubles rather than in foreign currencies.

The agency also referred to the Russian Central Bank’s decision to limit the transfer of some bonds to non-residents.

Fitch analyzed that “increasing sanctions and proposals that could limit energy trade increase the likelihood of a Russian political response that includes at least a selective default on its sovereign debt.”

Technical barriers, such as preventing the transfer of funds, can also prevent debt repayment.

If that happens, it will be the first time Russia has announced a “default” since 1998.