Rus­sia Can With­stand New Sanc­tions


MOSCOW (Dis­patches) - Rus­sia’s econ­omy has gained enough re­silience to with­stand new Western sanc­tions and the coun­try’s sov­er­eign rating may be up­graded by the end of the year, Kristin Lin­dow, a senior vice pres­i­dent at Moody’s In­vestor Ser­vice, said in an in­ter­view.

Tar­geted by Western eco­nomic and fi­nan­cial sanc­tions since 2014, Rus­sia’s econ­omy be­gan to re­cover last year af­ter a steep eco­nomic down­turn, thanks to higher oil prices and some struc­tural re­forms im­ple­mented by the gov­ern­ment.

“Our anal­y­sis is that the econ­omy and pub­lic fi­nances are in good shape and can with­stand new sanc­tions,” Lin­dow told Reuters late on Mon­day, be­fore the United States named ma­jor Rus­sian busi­ness­men on a list of oli­garchs close to the Krem­lin.

Late last week, Moody’s raised the coun­try’s sov­er­eign out­look to pos­i­tive from sta­ble just days be­fore widely- an­tic­i­pated re­ports on pos­si­ble new U.S. sanc­tions against Rus­sia.

The U.S. Trea­sury Depart­ment later re­leased a list of peo­ple close to the Krem­lin, cast­ing a po­ten­tial shadow of sanc­tions risk over a wide cir­cle of wealthy Rus­sians.

Moody’s out­look up­grade also came less than two months be­fore Rus­sia’s March pres­i­den­tial elec­tion, which Pres­i­dent Vladimir Putin is widely ex­pected to win.

“We were try­ing to send a mes­sage ... that we think that the econ­omy is re­silient to new sanc­tions. And we also didn’t feel it was nec­es­sary to wait to as­sign a pos­i­tive out­look un­til af­ter the pres­i­den­tial elec­tion,” Lin­dow said.

Global rating agen­cies are on the watch now for a sov­er­eign rating up­grade as higher oil prices eased con­cerns about Rus­sia’s fis­cal buf­fers, while the econ­omy is on track to grow for the sec­ond year in a row.

Lin­dow said a de­ci­sion on up­grad­ing Rus­sia’s rating could be made no later then in the next 12-18 months.

This year, Moody’s ex­pects Rus­sia’s econ­omy to grow by 1.6 per­cent, in­fla­tion to ac­cel­er­ate back to the cen­tral bank’s tar­get of 4 per­cent, and in­ter­na­tional re­serves to grow by an­other $40 bil­lion.

“What we’re look­ing for is a pol­icy mix that we think has been adopted. A fis­cal con­sol­i­da­tion that would al­low the deficit to be fi­nanced en­tirely do­mes­ti­cally just in case new sanc­tions are im­posed on Rus­sian gov­ern­ment debt. Sim­i­larly, the ex­change rate to be a shock ab­sorber,” Lin­dow said.

Af­ter the 2018 pres­i­den­tial elec­tion, which would lead to a new cab­i­net of min­is­ters, Moody’s also ex­pects to see “con­ti­nu­ity in terms of per­son­nel at the top of key min­istries” and the same eco­nomic and fi­nan­cial lines to be pur­sued.

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