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Fitch has downgraded Russia’s sovereign debt and says it may have to do so again.
The new rating is only two levels above "junk". With income from crude dropping sharply, the Russian economy is probably already in a deep recession.
According to Reuters, "Fitch Ratings on Wednesday downgraded Russia’s sovereign rating to ‘BBB’ and said further cuts were possible due to low commodity prices, high capital outflows, melting reserves and corporate debt problems."
Who holds Russia’s debt instruments? That is a good question. It is unlikely that Russia would go into default, but if oil drops below $30 and stays there for several quarters, the possibility starts to become an issue.
Maybe Russia’s largest creditors are large international banks. That will give them something new to write-off.
Douglas A. McIntyre
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