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S&P Global Ratings downgraded Russia's ratings deeper into "junk" territory for the second time in a week as the country comes under mounting pressure from a wide range of sanctions and other measures that are targeting its economy and raising the risk of a default.
The country's ratings were cut eight notches to CCC- on Thursday after S&P had downgraded it to BB+ last Friday, the agency said. The sovereign ratings remain on negative watch, which means a further downgrade is possible and S&P said it could lower them again in the next few weeks.
On Thursday Fitch and Moody's Investors Service downgraded Russia's sovereign credit rating six notches to "junk" or non-investment grade status due to a wave of US and EU sanctions. The downgrade in ratings signals a country is undergoing financial instability or may not have adequate cash reserves relative to its needs and financial obligations, which makes it speculative and considered a high credit risk. That will make it difficult for Russia and Russian companies to raise funding globally.
S&P said its latest downgrade was a result of new G7 government restrictions imposed on Russia in response to its military offensive in Ukraine that target its economy and Moscow's response to them.
Sanctions and other measures led to the Russian rouble plunging more than 28 per cent against the US dollar, a record low against the greenback, which prompted a run on the banks in the country. The Bank of Russia doubled interest rates and imposed capital controls to try and shield the country's $1.5 trillion economy from the economic fallout. Punitive measures also led to the Moscow stock exchange tanking last week with the central bank suspending trading at the exchange for the past five days.
S&P said it believes the confluences of measures "will likely substantially increase the risk of default".
"We estimate that international sanctions have reduced Russia's available foreign exchange reserves by as much as one half, including foreign currency deposits and securities domiciled in the US, the EU, and Japan," the rating agency said.
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Sony's game division and Nintendo said they have suspended shipments of software and hardware to Russia. Nintendo said it is suspending shipping all products to Russia "for the foreseeable future... due to considerable volatility surrounding the logistics of shipping and distributing physical goods." AFP -
Rio Tinto said it "is in the process of terminating all commercial relationships it has with any Russian business". It has an alumina joint venture with Moscow-based United Rusal International. Reuters -
McDonald's is temporarily closing all 847 of its restaurants in Russia. AFP -
Starbucks is suspending all business activity in Russia, including shipments of its products and cafes run by licencees. AFP -
Coca-Cola is suspending sales in Russia. Coca-Cola said its business in Russia and Ukraine contributed about 1 to 2 per cent of the company's net operating revenue in 2021. Reuters -
PepsiCo is suspending sales of its sodas in Russia. It said it would continue to sell daily essentials, such as milk and other dairy offerings, baby formula and baby food, in Russia. Getty Images / AFP -
Yum Brands, behind KFC and Pizza Hut, also said it was suspending investment in Russia. Reuters -
Toyota is halting production at its plant in St Petersburg, and will halt vehicle shipments to Russia. Reuters -
Ikea said it would suspend its activities in Russia and Belarus, affecting nearly 15,000 employees, 17 stores and three production sites. AFP -
Honda will stop exports of cars and motorcycles to Russia. EPA -
Jaguar Land Rover has paused the delivery of its cars to Russia due to "trading challenges". -
Airbus is suspending sale of parts and support services to airline customers in Russia. Reuters -
Boeing has suspended major operations in Moscow and temporarily closed its office in Kyiv. It is also suspending parts, maintenance and technical support services for Russian airlines. Reuters -
Nike has made merchandise purchases on its website and app unavailable in Russia as it cannot guarantee delivery of goods to customers in the country, an update on the sportswear maker's website showed. Bloomberg -
German sportswear company Puma has stopped deliveries to Russia, but its 100 stores are open. Getty Images -
Shell is to exit all its Russian operations, including a major liquefied natural gas plant. The company also plans to end its involvement in the Nord Stream II gas pipeline from Russia to Germany. PA -
BP is exiting its 19.75 per cent shareholding in Russian oil giant Rosneft after pressure from the UK government. BP has operated in Russia for more than 30 years. Reuters -
ExxonMobil will cease operations in Russia and refrain from making new investments in the country. It holds a 30 per cent stake, alongside Rosneft, Japan's Sodeco and India's ONGC Videsh, in the Sakhalin Island oil and gas fields in Russia’s far east. Its business in the country is valued at more than $4 billion. AFP -
Eni said it would withdraw from the Blue Stream gas pipeline linking Russia to Turkey, in which it has a 50 per cent stake. The company controls the gas pipeline -- which links the two countries via the Black Sea -- equally with Russian energy giant Gazprom. Reuters -
British Gas owner Centrica has said it will exit gas supply agreements with its Russian counterparts, including Gazprom. Centrica said it currently has a medium-term contract with Gazprom Marketing and Trading, the Russian energy company's UK entity, through which gas can be sourced from the open market. Reuters -
Norwegian energy group Equinor said it will start the process of divesting from its joint ventures in Russia. Reuters -
HSBC said it was starting to wind down relations with a host of Russian banks including the second-largest, VTB, one of those targeted by sanctions, a memo seen by Reuters showed. AFP -
Volkswagen suspended deliveries of cars to dealers in Russia. 'Deliveries are to resume as soon as the effects of the sanctions imposed by the European Union and the United States have been clarified', a VW representative said. AP -
Swedish automaker Volvo Cars said it would suspend car shipments to the Russian market until further notice, becoming the first international car maker to do so. Supplied -
GM said it would suspend all vehicle exports to Russia until further notice. The Detroit company does not have plants in Russia, only sells about 3,000 vehicles annually in the country and has limited supply-chain exposure. AFP -
Danish shipping giant Maersk said that it would stop taking new non-essential orders to and from Russia, owing to sanctions imposed over Moscow's invasion of Ukraine. AFP -
Singapore-headquartered container shipping company Ocean Network Express has suspended bookings to and from Russia. Reuters -
AerCap Holdings, the world's biggest plane lessor with about 5 per cent of its fleet leased to Russian airlines, said it will stop trading with Russian customers. Reuters -
US-based United Parcel Service said it is halting delivery services to Russia and Ukraine. Bloomberg -
FedEx also said it is temporarily suspending inbound and outbound services to Ukraine and inbound services to Russia until further notice. AP -
Microsoft said it would remove Russian state-owned media outlet RT's mobile apps from its Windows App store and ban ads on Russian state-sponsored media. Reuters -
Google has barred RT and other Russian channels from receiving money for ads on websites, apps and YouTube videos. Reuters -
German heavy-goods vehicle group Daimler Truck has said it will cease its co-operation with Russian lorry-maker Kamaz. AFP -
Motorcycle maker Harley-Davidson has suspended shipments of its bikes to Russia. Pictured, Russian President Vladimir Putin. Reuters -
Facebook owner Meta Platforms has restricted access to accounts run by Sputnik and RT in the EU. Reuters -
Apple has paused all product sales and limited the functionality of other services in Russia. Reuters
"This has substantially weakened Russia's external liquidity during a period of rising foreign currency demand. The sanctions also imposed restrictions that deny or significantly diminish access of the Russian banking system to the global financial system, markets, and infrastructure."
Capital control measures that ban cross-border financial flows, debt service payments of both the private sector and the government "will very likely restrict the ability of nonresident domestic and foreign currency bondholders to receive interest and/or principal payments on time", S&P said.
Key Russian banks have been barred from the Swift global financial network, while the US Treasury prohibited Americans from engaging in transactions with the Bank of Russia, the Russian Direct Investment Fund and the country's Ministry of Finance.
On Wednesday, Russian lender Sberbank said it is exiting European markets as a result of big cash outflows and threats to its staff and property. On Wednesday, the European Union said it will also ban seven major Russian banks out of the Swift messaging system that facilitates global financial transactions effective March 12.
On Thursday, the London Stock Exchange suspended trading of 28 securities linked to Russia. Global index providers MSCI and FTSE Russell are also excluding Russian equities from their indexes tracked by investors with trillions of dollars of assets under management, stemming the flow of investments into Russia from a large segment of the investment-fund industry.
The majority of market participants deem Russia’s equity market “uninvestable” and its securities will be removed from emerging markets indexes effective March 9, MSCI said. FTSE Russell will be removing Russia equities from its index at a zero value on March 7.
The military offensive in Ukraine is also impacting Russia's energy industry. The country produces about 10 million barrels of oil a day and European countries rely on Russia also for gas.
"A a week into the war, two thirds of Russian oil is struggling to find buyers. Some businesses don’t want to do business with Russia as the reputational risk ... became too high, and some simply try to cut exposure to the Russian oil as early as possible and to find alternative suppliers in fear and in preparation of future sanctions on Russian oil," said Ipek Ozkardeskaya, a senior analyst at Swissquote.
A wave of US and European companies have exited Russia, are ceasing operations or refraining from investing further in their existing operations in the country.
ExxonMobil is ceasing operations in Russia and refrain from making new investments in the country. It will discontinue operations and take measures to exit the business, valued at more than $4 billion, according to its last annual report.
French energy giant TotalEnergies said it supports EU sanctions against Russia in response to its military offensive in Ukraine "regardless of the consequences [currently being assessed] on its activities in Russia," but the company stopped short of saying it would divest or pull out of the country. It holds a 19.4 per cent interest in Novatek, as well as other oil and gas projects in Russia, according to its website.
TotalEnergies said it will no longer provide capital for new projects in Russia and "condemns" Russia's military offensive in Ukraine.
Austria’s OMV also said it terminated a sale agreement with Gazprom for a 24.98 per cent stake in the development in the Urengoy gas and condensate field, and says it will review involvement in Nord Stream 2 Pipeline.
Rival BP agreed to unload its Rosneft 20 per cent stake and Shell said it will end its alliance with Gazprom as well. Italian oil company Eni said it plans to sell its stake in the Blue Stream pipeline carrying Russian gas to Turkey that it co-owns with Russia's Gazprom, according to Reuters. British Gas owner Centrica said it will exit gas supply agreements with its Russian counterparts, including Gazprom, due to the Ukraine crisis.
