Russia Rating Slips to Junk, and the Ruble Takes a Beating

Move Comes as Surge of Fighting in Ukraine Prompts West to Threaten New Sanctions.

Russia’s fractured economy suffered another potential blow Monday after credit-rating firm Standard & Poor’s cut the country’s credit rating to junk, sending it below investment grade for the first time in more than a decade.

While the move had been largely anticipated by financial markets, the news, which came late in the Russia day, helped drive the battered ruble even lower. In cutting Russia’s rating to “BB+”, S&P cited Russia’s limited flexibility to use monetary policy to help spur growth.

Heavily dependent on oil exports, Russia faces mounting pressure from U.S. and European officials over the unrest in eastern Ukraine and its annexation of the Crimea region. On Saturday, U.S. and European leaders threatened new sanctions against Moscow. At the same time, a dramatic 51% slide in the ruble in the past seven months has fueled inflation and forced the Russian central bank to drive up interest rates, a curb on economic growth. Russia’s reliance on tax revenue tied to the oil industry has also left it exposed as crude prices tumble.

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