(Reuters) – Ratings agencies Fitch and Moody’s downgraded Russia six notches to “junk”, saying Western sanctions cast doubt on the country’s ability to service its debt and weaken the economy.
Fitch downgraded Russia to “B” from “BBB” and placed the country’s rating on “negative observation”. Moody’s also downgraded the country by six levels, to B3, from Baa3.
Fitch said the only other precedent for such a massive downgrade of a single sovereign was South Korea in 1997.
Russian financial markets began to show turmoil after sanctions were adopted over the invasion of Ukraine, the biggest attack on a European country since World War II.
The invasion sparked a series of warnings about the impact on the Russian economy. S&P downgraded the country’s rating to “junk” last week.
The war also prompted index providers FTSE Russell and MSCI to announce on Wednesday that they will be removing Russian stocks from all their indices.
FTSE Russell said the ruling will take effect on March 7, while MSCI said its ruling will be implemented with a single step across all of its indices from the March 9 close.
Russia has a weight of 3.24% in the MSCI Emerging Markets Benchmark Index, in addition to a weight of around 30 basis points in its global index.
(Reporting by Mehr Bedi in Bengaluru and Megan Davies in New York; additional reporting by Andrew Galbraith in Shanghai and Vidya Ranganathan in Singapore)
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