Moody's on impact of new U.S. sanctions on Russian economy

Moody's on impact of new U.S. sanctions on Russian economy

The first set of US sanctions against Russia are unlikely to have a large impact on the Russian government funding or the Russian economy in general, the Moody's Investors Service said.

"There has already been a material contraction in trade between Russia and the U.S. over recent years and the Russian government has minimal reliance on external bank financing. As a consequence, the credit impact of the newly imposed sanctions on Russian government funding or the broader Russian economy is likely to be relatively contained unless they were to cause a significant erosion in investor confidence," the Moody's said in a comment.

The Moody's Investors Service also said that potential U.S. sanctions against Russian state-owned banks are unlikely to cause a system-wide banking crisis in the country.

"The menu of potential second round sanctions being discussed in Washington is wide, ranging from a U.S. veto on multilateral lending, a prohibition on lending by U.S. banks, a ban on all non-agricultural exports, further import restrictions, a downgrade or suspension of diplomatic relations and suspensions of U.S. landing rights for Russian national air carriers… "

"In our view, sanctions against mostly deposit-funded state-owned banks would be unlikely to cause a system-wide banking crisis but would impede their ability to provide credit and support growth. Russia’s low reliance on capital-intensive non-conventional oil production limits the potential fallout from lack of U.S. participation in its oil projects," the Moody's said.

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