InsightsA note on Russia's Sovereign Risk Score

A note on Russia's Sovereign Risk Score

Bernhard Obenhuber
Mar 07, 2022

It's tragic to see Russia’s unwarranted invasion of Ukraine. It’s painful to see how innocent people are being displaced from their homes, perish, or be separated from their families to defend their country against Putin’s aggressive regime. Many of us believe that ordinary Russian citizens do not support this war but are fearful of the very real repression of speaking up against it. This is the textbook definition of an authoritarian regime. 

The international community reacted with unprecedented and coordinated sanctions against Russia. If the sanctions are in place for a considerable time period – as is currently our base case – the Russia will be largely isolated and its economy will be severely hampered. 

Russia started the war with a strong sovereign balance sheet, external position and large foreign currency reserves. Given the freezing of assets, exclusion from international payment systems and closure of international capital markets for Russia the strong solvency does not mean much and a sovereign default is likely. 

Currently, the visibility on the depth of economic collapse and financial system is very low and is not yet reflected in economic statistics or IMF forecasts. As a result, we decided to remove the 2022 estimate for Russia’s Sovereign Risk Score and ESG Sovereign Risk Score from the platform. 

You’ll find rating assessments of Russia on the platform that combine quantitative and qualitative factors and give a better picture of Russia’s sovereign and transfer risk. We’re also publishing a blog post on a scenario analysis that you can find here.

Written by:
Bernhard Obenhuber