The reason given is that the downgrade comes after the introduction of measures that would significantly increase the risk of default. This included the capital controls put in place by the authorities, which are intended to protect the ruble from the effects of severe economic sanctions while preserving the remaining usable reserves. The new restrictions imposed by the G7 governments on Russia were imposed in response to its accelerated military operations in Ukraine.
The rating agency estimates that international sanctions have halved Russia’s available foreign exchange reserves, including foreign currency deposits and securities in the United States, the European Union and Japan. This has significantly weakened Russia’s external liquidity at a time of increasing demand for foreign exchange. The sanctions also imposed restrictions that prevented or significantly restricted the Russian banking system’s access to the global financial system, markets, and infrastructure.
From public information and press reports, it was known that capital control measures included the prohibition of cross-border financial flows, including debt service payments from both the private sector and the government. This potentially limits the ability of domestic and non-resident foreign bondholders to receive timely interest and/or principal payments.
Frankfurt (Dow Jones)
