Fitch downgrades Russia firms

Paris: Credit rater Fitch on Saturday downgraded 28 Russian natural resources companies including state gas giant Gazprom, warning they risk defaulting on payments under sanctions imposed for Russia´s invasion of Ukraine.

Fitch Ratings said in a statement it had lowered the rating on the companies, which also include oil producer Lukoil and miner Rusal, from B to CC. The latter rating implies some form of default on their payments was "probable".

It cited a Russian decree on March 5 that authorised Russian companies to settle debts to certain blacklisted foreign companies in rubles rather than foreign currency.

The move, announced as the ruble plunged, was a response to international sanctions imposed on Russia because of its February 24 invasion.

The decree, "against the backdrop of an escalating sanctions regime, could impose insurmountable barriers to many corporates´ ability to make timely payments on foreign- and local-currency debt to certain international creditors," Fitch said. Another major rating agency, Moodys, also downgraded Gazprom and Lukoil this week. Three major raters have classed Russia as at risk of defaulting on its long-term sovereign debt due to sanctions.

A credit rating cut makes it harder for a company or country to borrow money at manageable rates.

In an escalation of the sanctions, the United States and Britain said on March 8 they were cutting off Russian oil imports. "Ongoing ratcheting up of sanctions, including restrictions in energy trade and imports, increase the probability of a policy response by Russia, and further weaken its economy, eroding the operating environment for its corporates," Fitch added.