Russia cut to 'junk' by Moody's, Fitch; tanks roll into Kherson

Russia’s long-term foreign debt rating was downgraded by Moody’s and Fitch, as Russian army tanks rolled into Kherson, the first major city to fall  since Moscow invaded a week ago. Despite the global pressure to back off, President Vladimir Putin  told French leader Emmanuel Macron on Thursday that Russia would achieve the goals of its military intervention in Ukraine whatever happens, the Kremlin said. 

In southern Ukraine, Kherson, the strategic port city of 290,000 people near the Black Sea came under siege as Russian forces pressed ahead with their  offensive across major urban centres.

Moody’s cut Russia’s ratings to B3 from Baa3, with the ratings company saying there may be further cuts. “The scope and severity of the sanctions announced to date have gone beyond Moody’s initial expectations and will have material credit implications,” it said in a statement.  Fitch lowered Russia to B from BBB and placed the rating on negative watch on Wednesday, citing weakening external and public finances, slowing growth, elevated domestic and geopolitical risk and the potential for further sanctions. Russia’s credit rating was cut six levels to junk by Fitch.

As the war entered its second week, Russian forces pressed ahead with their offensive in Ukraine , firing missiles at Kyiv overnight. An amphibious landing of marines took Ukraine’s second Azov Sea port Berdyansk and may have pressed on to join with Russian and pro-Russia separatist troops pushing west to encircle and lay siege to the southern city of Mariupol. That city of more than 500,000 was under heavy bombardment again on Thursday. Constant attacks over the past 24 hours have cut off water and power supply.

But Britain’s defence ministry said in an intelligence update that the main body of the large Russian column advancing on Kyiv remained over 30 km from the centre of the city having been delayed by “staunch Ukrainian resistance, mechanical breakdown and congestion”.

More action took place in the financial world. MSCI and FTSE Russell said they were cutting Russian equities from widely-tracked indices, while the London Stock Exchange suspended dozens of Russian depositary receipts from trading, isolating the stocks from a large segment of the investment-fund industry.

An overwhelming majority of market participants see the Russian market as “uninvestable” and its securities will be removed from emerging markets indexes effective March 9, MSCI said. 

The Russian state, meanwhile, is set to fail to pay foreign bondholders a coupon due on a bond for the first time since 1998, the Wall Street Journal reported. The holders of a ruble-denominated government bond maturing in 2024 were meant to receive payment on Thursday for a coupon due the previous day. Investors in Europe that own this bond saidthey had’t received it or any notifications that it was on its way, the report said.

Russia’s National Settlement Depository reported that the Ministry of Finance sent the interest payment, as usual. In normal times, the depository would then transfer it to the accounts of bondholders with payment scheduled for delivery the following day. But due to Russia’s retaliation to Western sanctions, the money was stuck in jammed financial infrastructure, creating the conditions for Russia’s first potential default in over two decades.

Putting a figure to its casualties, Russia’s defence ministry on Wednesday said  that 498 Russian soldiers had died in Ukraine and another 1,597 had been wounded since the beginning of Moscow’s military operation there, Russia’s RIA news agency reported.

In the US, President Joe Biden’s administration was seeking $32.5 billion in additional funding from Congress to aid Ukraine and bolster the US Covid response. It was seeking $10 billion to help train Ukraine’s military, protect its electrical grid, boost its cyberdefences and enforce sanctions, the Washington Post reported. Another $22.5 billion would go toward shoring up the nation’s pandemic response.

7 days of war

When Russian President Vladimir Putin addressed his nation in the early hours of February 24, he announced a limited “special military operation” against Ukraine. It turned out to be the biggest attack by one state against another in Europe since World War II. The West and its allies decried the invasion and pounded Russia with sanctions, including on Putin himself. The latest was a ban from the SWIFT system. The Moex Russia index fell 50 per cent from a record high, erasing more than $150 billion in value, on February 24. Apple, Boeing and ExxonMobil led an exodus of firms from Russia. But seven days since it started, the battle for the capital Kyiv rages on.  Swapnil Joglekar