Oil production in Russia will decrease in 2016 due to the economic sanctions imposed by the European Union and the United States, Fitch Ratings said in its forecast Tuesday.
The United States, the European Union and their allies imposed a number of rounds of economic sanctions against Russia in 2014, accusing it of meddling in the Ukrainian conflict. In June, the economic sanctions against Russia were extended for six months.
According to the international ratings agency, limited access to international finance and low oil prices will be among the reasons for the reduction in oil extraction.
The credit profiles of Russian oil and gas companies should remain stable, despite low oil prices, owing to progressive taxation and the flexibility of the ruble, Fitch’s rating predicted. Their indices will be exposed predominantly to the impact of Russia’s sovereign rating.
On July 3, Fitch Ratings maintained Russia’s long-term foreign and local currency Issuer Default Ratings (IDR) at ‘BBB-‘ with a Negative Outlook. The ‘BBB-‘ rating is one mark above the speculative grade, or “junk” bond category.
Despite the pessimistic prognosis, the Russian Finance Ministry argues that the downgrades by western ratings agencies are politically motivated and do not reflect the real situation in the market.