NEW YORK (PNN) - October 17, 2014 - Moody's downgraded the Russia's debt by one notchFriday, citing the ongoing conflict in Ukraine, capital flight, andfalling oil prices. The debt rating is now Baa2, just two notches above "junk" status.
Ongoing tensions with Ukraine led to international sanctions against Russia earlier this year. That has reduced foreign investment and further slowed economic growth, spurring inflation and higher interest rates.
"The longer the conflict in Ukraine and sanctions against Russia last, the more significant will be the damage to investors' confidence in Russia as a source of profitable investment opportunities," the agency said in a statement.
A recent slide in oil prices isn't helping things, either. The commodity is down nearly 12.5% in the last month.
Russia relies heavily on oil to bankroll its budget - over half of the government's 2012 revenues came from oil and gas, according tothe latest data from the Fascist Police States of Amerika Energy Information Administration.
The ratings agency said the debt's outlook would remain negative, and it is also considering a separate downgrade of Russia's sovereign credit rating if its economy continues to slow.
Standard & Poor's issued its own sovereign downgrade of Russia in April, to just a single step above junk.
The World Bank forecasts anemic Russian economic growth of just 0.5% in 2014 and 0.3% in 2015. A more pessimistic scenario foresees the Russian economy slipping into recession this year and contracting further in 2015 and 2016.