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Russia's invasion of Ukraine has come with a heavy price for the government. Western sanctions have isolated it from the international financial system and choked off demand for many of its key exports.
Sanctions have cut off Russia's access to much of its foreign reserves, threatening to plunge the country into default as it could struggle to meet its foreign debt payments. The ruble has plummeted to record lows and the country's stock market has been paralyzed for weeks.
S&P Global this week cut Russia's credit rating to "CC", which it defines as "default imminent with little prospect for recovery." Four years ago, almost to the day, the agency awarded Russia an investment-grade "BBB-" rating.
It's not just the government that will struggle to raise capital on the global market. Sanctions have thrown the future of many of its biggest companies into doubt. S&P Global said this week it had made 121 changes to the ratings of companies that cited the Russia-Ukraine war, rising energy prices, or both as reasons. Of that total, 77 were Russian.
"In terms of creditworthiness, the Russian-Ukraine conflict has had the largest impact on banks, with 28% of total related rating actions," the agency said.
And investors are taking no chances. S&P Global Ratings noted the risk premium on European emerging-market corporate debt is now almost double its five-year average, compared to a roughly in-line reading at the start of the year. Formerly lucrative firms, such as banks, energy producers and mining companies, have been reduced to junk status. Commodity traders are deliberately shunning Russian shipments of key raw materials and countries are scrambling to wean themselves off Russian energy supplies.
The agency said there are already 30 "fallen angels" as a direct result of the Russia-Ukraine conflict. The term refers to an issuer whose credit rating has been cut from investment grade to speculative grade, also known as junk.
Shares in some of the country's biggest corporates no longer trade in New York or London, where stock in the likes of Sberbank, oil and gas producers Gazprom and Rosneft, and metal producers Norilsk and Rusal, plunged to almost $0 a couple of weeks ago.
And it won't end there. S&P Global said there was huge uncertainty around the extent, the outcome and the consequences of Russia's war in Ukraine.
"Irrespective of the duration of military hostilities, sanctions and related political risks are likely to remain in place for some time," S&P said. "Potential effects could include dislocated commodities markets--notably for oil and gas--supply chain disruptions, inflationary pressures, weaker growth, and capital market volatility."
S&P shared several charts that show the extent of the impact to the creditworthiness of Russian companies:
