S&P cuts Russia's credit rating

Published April 25, 2014 8:15AM (EDT)

Secretary of State John Kerry speaks about the situation with Ukraine and Russia from the State Department in Washington, Thursday, April 24, 2014. Kerry is accusing Russia of failing to live up to commitments it made to ease the crisis in Ukraine. (AP Photo/Jacquelyn Martin) (AP)
Secretary of State John Kerry speaks about the situation with Ukraine and Russia from the State Department in Washington, Thursday, April 24, 2014. Kerry is accusing Russia of failing to live up to commitments it made to ease the crisis in Ukraine. (AP Photo/Jacquelyn Martin) (AP)

MOSCOW (AP) — The Standard & Poor's credit agency on Friday cut Russia's credit rating for the first time in more than five years, raising the financial stakes flowing from the crisis in Ukraine as tensions rise and the United States and its allies are contemplating further economic sanctions.

In southeastern Ukraine, seven people were injured early Friday by a blast at a checkpoint set up by local authorities and activists outside the Black Sea port of Odessa. Local police spokesman Volodymyr Shablienko said unknown men had thrown a grenade at the checkpoint.

A senior official traveling in Asia with President Barack Obama said he is likely to call European leaders Friday to discuss the possibility of further sanctions. The official spoke on condition of anonymity because there had been no official announcement.

Russia announced new military exercises Thursday involving ground and air forces near its border with Ukraine, swiftly responding to a Ukrainian operation to drive pro-Russia insurgents out of occupied buildings in the east. At least two people were killed in a clash at a checkpoint.

The ratings agency's main concerns the flight of capital and the risk to investment in Russia since the Ukraine crisis blew up late last year.

Credit ratings are important for the economy because they determine how expensive it will be for a country or company to borrow on international markets.

Russia's economic growth slowed to 0.8 percent in the first quarter, sharply worse than earlier forecast while spooked investors pulled about $70 billion out of the country — more than in all of 2013. However, the cut in Russia's rating from BBB to BBB- is the most tangible economic result of Russia's policies toward Ukraine so far.

BBB- is just a step above the so-called "junk" level.

S&P said in a statement that the revised Russia's rating because the tense situation "could see additional significant outflows of both domestic and foreign capital from the Russian economy."

Rating agencies had not cut Russia's sovereign rating since December 2008.

Russian Economic Development Minister Alexei Ulyukayev sought to play down the downgrade, calling it "partly politically motivated."

Moscow in March recognized a hastily called referendum in Ukraine's Black Sea peninsula of Crimea and annexed it weeks later, attracting condemnation of the West as well as sanctions targeting individuals. Secretary of State John Kerry on Thursday warned Moscow that unless it took immediate steps to de-escalate the situation, Washington would impose additional sanctions.

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AP reporter Julie Pace in Seoul contributed to this report.


By Nataliya Vasilyeva

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