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Foreign Ministry: S&P’s decision to raise outlook on Ukraine rating causes perplexity

July 17, 2014, 22:19 UTC+3 MOSCOW
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MOSCOW, July 17. /ITAR-TASS/. The Russian Foreign Ministry on Thursday criticized international ratings agency Standard & Poor’s decision to revise its outlook on Ukraine’s credit rating.

“The recent decision by international ratings agency Standard & Poor’s to raise the outlook on Ukraine’s sovereign credit rating to stable from negative at least causes perplexity,” the ministry said in a comment.

Standard & Poor’s Ratings Services revised its outlook on Ukraine to stable from negative and affirmed its 'CCC/C' long- and short-term foreign currency sovereign credit ratings and 'B-/B' long- and short-term local currency sovereign credit ratings on Ukraine on July 11.

“The stable outlook reflects our view that the $17 billion, two-year International Monetary Fund (IMF) program adopted in April 2014 has helped stabilize the deteriorating macroeconomic situation in Ukraine,” S&P said. “However, we consider that significant risk attends full disbursement of funds under the program.”

The Russian Foreign Ministry said that “despite financial support provided to Ukraine on the part of international financial organizations, first of all the International Monetary Fund, the macroeconomic situation inside the country remains extremely unstable.”

“The debt load increase, the state budget deficit with a simultaneous considerable reduction of the GDP and minimum financial safety margin put the country on the verge of bankruptcy,” the ministry said.

“Normal economic development is hindered by a significant drop in investment attractiveness of the country due to an unstable political situation, reduction of the foreign trade turnover and high cost of borrowed funds,” it said.

The Russian foreign policy department stressed that “a respected agency” raises the outlook for a country where a civil war is ongoing. “Particularly curious is the fact that the change… by the agency coincided in time with the Kiev authorities-announced plans on large-scale privatization.”

“Objectiveness and impartiality of this decision by Standard & Poor’s cause serious doubts,” the ministry’s comment says. “This is not the first time we are faced with political involvement of the three leading international ratings agencies.”

“The long-term credit rating of Crimea was lowered by a few stages to default after the peninsula acceded to the Russian Federation,” it said.

The Russian Foreign Ministry confirmed the Russian side’s disposition to constructive dialogue with Western and Asian partners “on the issue of forming independent expert institutions, whose assessments and ratings would be based on an objective and non-ideologized approach.”

Ukraine has been in turmoil since a coup occurred in the country in February and then-President Viktor Yanukovich had to leave it for security reasons. In March, the Crimean Peninsula refused to obey the coup-imposed Ukrainian leaders and seceded from

Ukraine after a referendum to reunify with Russia after 60 years as part of Ukraine.

Despite Moscow’s repeated statements that the Crimean referendum on secession was in line with the international law and the UN Charter and in conformity with the precedent set by Kosovo’s secession from Serbia in 2008, the West and Kiev have refused to recognize the legality of Crimea’s reunification with Russia.

Massive protests against the coup-imposed Ukrainian authorities erupted in Ukraine’s southeastern territories, mainly the Donetsk and Lugansk regions, after Crimea’s accession to Russia.

Pro-Kiev troops and local militias in the Donetsk and Lugansk regions are involved in fierce clashes as the Ukrainian armed forces are conducting a military operation to regain control over the breakaway regions, which on May 11 proclaimed their independence at local referendums.

During the military operation, conducted since mid-April, Kiev has used armored vehicles, heavy artillery and attack aviation. According to Ukraine’s Health Ministry, 478 civilians have been killed and 1,392 wounded in it. Many buildings have been destroyed and tens of thousands of people have had to flee Ukraine’s war-torn Southeast.

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