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Moody's - Russia-Ukraine tensions and their credit implications

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Research Announcement:

Moody's - Russia-Ukraine tensions and their

credit implications

London, February 08, 2022 --

» Moody’s baseline expectation is that tensions will remain heightened but stop short of a further

outright military conflict

» A further Russian military incursion into Ukraine would likely result in both sovereign ratings being

placed on review for downgrade

» Though a very unlikely scenario, sanctions that disrupt Russia's ability to execute cross-border

payments in a timely manner could impede sovereign debt payments

Russia's (Baa3 stable) military build-up along Ukraine's (B3 stable) border has increased the risk of

further military conflict between the two countries and – in response – Western countries’ imposition

of additional sanctions on Russia.
While not our baseline expectation, a further Russian incursion into Ukraine would be credit-negative

and would likely result in both sovereign ratings being placed under review for downgrade, Moody’s

Investors Service said in a report today.
Moody’s expects that any military incursion into Ukraine would result in Western countries imposing

additional sanctions on Russia. The credit impact of new sanctions would depend on the sectors

targeted, their scope and the degree of co-ordination among Western countries.
There is likely to be limited information available at the outset of a renewed conflict. A rating review,

which is typically concluded within three months, would give Moody’s time to assess the extent of

credit implications as the crisis unfolds.
While Russia's ability to respond to and operate under sanctions has strengthened in recent years,

significant additional economic and financial sanctions, such as controls on access to key imports

needed to modernise the economy, could result in downward pressure on its credit profile.
While unlikely, the imposition of severe and co-ordinated sanctions that hinder the execution of

cross-border payments in a timely manner would pose more immediate risks to Russia's credit

profile.
“Russia has significant buffers that help to insulate its credit profile in the short term from the effects

of most new sanctions,” said Evan Wohlmann, Vice President-Senior Credit Officer at Moody’s. “Still,

while an unlikely and very remote scenario, severe sanctions that lead to a delay in the repayment of

Russia's external debt obligations could result in a default under our definition and a downgrade of

the rating.”
Ukraine has strengthened its fiscal and external buffers since the last military escalation with Russia

in 2014-15 and this would help it withstand the immediate effects of a conflict. However, material

downward credit pressure could develop over time unless significant external financial support were

to be provided to shore up the country's financing position given sizeable external refinancing needs.

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Read our FAQs on credit implications of the heightened tensions and risk of conflict:

http://

www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1318647

Read our Russia credit opinion update:

http://www.moodys.com/

researchdocumentcontentpage.aspx?docid=PBC_1315818

Subscribers can access the report at:

http://www.moodys.com/researchdocumentcontentpage.aspx?

docid=PBC_1318647

NOTE TO JOURNALISTS ONLY: For more information, please call one of our global

press information hotlines: New York +1-212-553-0376 , London +44-20-7772-5456 , Tokyo

+813-5408-4110 , Hong Kong +852-3758-1350 , Sydney +61-2-9270-8141 , Mexico City

001-888-779-5833 , São Paulo 0800-891-2518 , or Buenos Aires 0800-666-3506 . You can also email

us at mediarelations@moodys.com or visit our web site at www.moodys.com.
This publication does not announce a credit rating action. For any credit ratings referenced in this

publication, please see the ratings tab on the issuer/entity page on

www.moodys.com

for the most

updated credit rating action information and rating history.
Evan Wohlmann

VP-Sr Credit Officer

Sovereign Risk Group

Moody's Investors Service Ltd.

JOURNALISTS: 44 20 7772 5456

Client Service: 44 20 7772 5454
Dietmar Hornung

Associate Managing Director

Sovereign Risk Group

Moody's Deutschland GmbH

JOURNALISTS: 44 20 7772 5456

Client Service: 44 20 7772 5454
Releasing Office:

Moody's Investors Service Ltd.

One Canada Square

Canary Wharf

London, E14 5FA

United Kingdom

JOURNALISTS: 44 20 7772 5456

Client Service: 44 20 7772 5454

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