The economic measures adopted by democratic countries are taking their toll on the already battered Russian economy. If in military matters the war seems to be at a standstill and everything announces times of suffering for the Ukrainians, the Russians have entered a destructive spiral that is going to leave their economy in a tailspin.

Russian debt is on the verge of default and the country’s sovereign long-term issuer credit rating has been downgraded again. After the downgrade carried out last Monday by the credit rating agency Moody’s from ‘B3′ to ‘Ca’, this Wednesday the credit rating agency Fitch Ratings has again downgraded this grade in Russia to ‘C’ from ‘B’, as a reflection of the risk of “imminent” default.

The justification for this downgrade is due, in part, to the approval on March 5 in Russia of the decree that could potentially force the redenomination of sovereign debt payments in foreign currency to local currency for creditors in specific countries, as detailed in Fitch’s analysis.

Similarly, the agency notes that the implementation of the Russian Central Bank’s regulation, since the end of last week, has restricted the transfer of Russian local currency debt coupons to non-residents.

In this regard, increased sanctions and proposals to limit Russia’s energy trade increase the likelihood of a policy response by the Kremlin such as a selective default on its sovereign debt obligations.

S&P Global Ratings already downgraded both the local and foreign currency credit ratings of Russia’s sovereign debt to ‘CCC-‘ from ‘BB+’ last week, following the increased risk of default as a result of sanctions imposed on the country following the invasion of Ukraine. Similarly, the rating agency decided to keep the country’s rating on watch with negative implications, which leaves open the possibility of further downgrades in the short term.

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