Fitch downgrades Russia on growing default fears

Fitch Ratings has downgraded Russia after it warned that the country was close to defaulting on its debts.

The ratings agency first cut Russia’s long-term foreign currency issuer default rating to ‘B’/rating watch negative at the start of the month.

But on Wednesday it cut that further, to ‘C’, reflecting its view that a sovereign default was now ‘imminent’. The only Fitch rating weaker than ‘C’ is ‘RD’, which is given when an issuer is in default.

Fitch said: "The further ratcheting up of sanctions, and proposals that could limit trade in energy, increase the probability of a policy response by Russia that includes at least selective non-payment of its sovereign debt obligations."

It added that the risk of technical barriers to servicing debt being imposed had also risen "somewhat" since its last review on 2 March.

Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said: "With the sanctions screws turning ever tighter, and access to the depths of its war chest out of reach, Russia’s financial system looks in even greater peril.

"Russia has now retreated further into junk status. The country’s deteriorating financial situation comes as more big consumer names take a short-term hit by suspending business in Russia to protect their long-term reputations."