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Analysts: Russia should keep Moody’s rating in mind but rely on other agencies

February 26, 2015, 15:50 UTC+3 Zamyatina Tamara
© EPA/YURI KOCHETKOV

MOSCOW, February 26. /TASS/. The international rating agency Moody’s decision to lower Russia’s sovereign debt rating to the speculative grade is highly controversial but it should by no means entail suspension of cooperation with the world’s leading rating agencies, poled financial analysts have told TASS.

Last Saturday, Moody’s revised Russia’s sovereign debt rating downwards to the speculative (junk) level Baa3 from Ba1, outlook negative. And days afterwards, on Wednesday, it lowered the ratings of Russia’s eleven regions, four cities, three public companies, six banks and the Mortgage Lending Agency. Moody’s specialists attributed their decision to the prolonged economic crisis in Russia against the backdrop of low oil prices.

Both current Finance Minister Anton Siluanov, and his predecessor, Alexey Kudrin, were surprised. Siluanov dubbed the agency’s verdict as "politicized," while Kudrin described it as "hardly explainable." And Deputy Finance Minister Sergey Storchak urged a harder line against the international rating agencies and termination of all contracts with them so as not to waste Russian budget money on their services.

Against this background the chief executive officer of the company Rus-Rating, Alexander Zaitsev, said that a newly-founded Chinese-Russian-US rating agency, called Universal Credit Rating Group (UCRG), hoped to obtain a license in Russia in July. If that happens, it will be able to award its first ratings to Russian and Chinese companies in 2015. The chief of the UCRG observer council, former French Prime Minister Dominique de Villepin, said the UCRG would be using a new methodology capable of steering clear of undesirable political connotations.

"There are 179 international rating agencies around the world. The three leading agencies - Moody’s, Standard & Poor’s, and Fitch (the so-called Big Three) account for 96% of the market of rating services. In fact, they are US financial policy tools. When it declared a war of sanctions against Russia, the United States employed for this purpose its rating agencies, which take commanding positions around the world," the director of strategic analysis and research at Russia’s Vneshtorgbank, Vladimir Andrianov, said.

"During the world economic crisis of 2008 all three agencies found their reputation greatly harmed, as it turned out they had overstated the ratings of US mortgage companies that actually provoked the crisis. Moody’s, Standard & Poor’s and Fitch are biased and corrupt. Their ratings are very far from being objective. Russia’s budget deficit is a tiny 2-3%, the trade balance has a surplus, and the country’s financial condition is not at risk. Moody’s decision to downgrade Russia’s rating into ‘junk’ territory was ‘made-to-order’ 100-percent." Andrianov said.

"Russia will have to bear the opinions of Moody’s, Standard & Poor’s and Fitch in mind. That’s what today’s world is like, and achieving a U-turn overnight will hardly possible. However, it will make sense to pay more attention to the domestic and newly-created international rating agencies, in particular, the joint China-Russia-US Universal Credit Rating Group and to persuade potential investors to avoid blindly trusting Russia’s ill-wishers and competitors. Russia is about to adopt a special law on the rating agencies. The bill was submitted to the State Duma just recently," Andrianov said.

"Whatever ratings Moody’s, Standard&Poor’s and Fitch may decide to award, Russia should seek the well-identified long-term benchmarks to stabilize the financial system and achieve high economic growth rates. As for the agencies in the Big Three group, cooperation with them should proceed as before. In this way the Russian government will be able to make public and defend its point of view," Deutsche Bank’s chief economist in Russia, Yaroslav Lissovolik, told TASS.

"Alongside this Russia should work on the creation of alternative rating agencies and to enter into alliances with China and other countries with emerging markets. Then the world market of rating agencies will be more competitive and impartial," Lissovolik said.

And the president of the Association of Russian Banks, Garegin Tosunian, has his own vision of the affair.

"I believe that Russia should by no means reject Moody’s services, slam the door or stage other demarches. The agency’s rating of Russia has an unmistakable political flavor and an economic side to it. Indeed, what has happened? Russia’s rating has been cut to junk. Fine! Pretty soon they will feel ashamed of themselves, because that’s sheer speculation and a sure sign Moody’s is being partial. That’s clear to any professional. This situation should be taken with a pinch of philosophy and with dignity."

 

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