A credit ratings agency downgraded Russia's to junk status on Wednesday and warned the nation of a looming sovereign debt default amid the invasion of Ukraine.
The "C" rating by Fitch Ratings sends a signal to investors that Russia might soon be unable to pay its debts, the Washington Post reported. Two other global credit agencies, Moody's and S&P Global, have taken similar action in recent days.
The downgrade came as a swath of Western sanctions chip away at the nation's economy. The economic measures have caused the value of the Russian ruble to plummet, which will boost the cost of imported goods when inflation was already high, the Associated Press reported.
Many companies and organizations have also broken ties or distanced themselves from Russia during the conflict, which has further alienated the nation from the global economy.
Fitch Ratings said in an explainer on its decision to downgrade Russia that the "C" rating "reflects Fitch's view that a sovereign default is imminent." The agency had downgraded Russia to a "B" just last week, citing the effects of the global sanctions and the possibility of additional measures.
Developments since issuing the "B" rating "have, in our view, further undermined Russia's willingness to service government debt," the agency said.
"More generally, the further ratcheting up of sanctions, and proposals that could limit trade in energy, increase the probability of a policy response by Russia that includes at least selective non-payment of its sovereign debt obligations," Fitch said.
The agency added that there was also a risk of "technical barriers to servicing debt, including through the direct blocking of transfer of funds, or through clearing and settlement systems, have also risen somewhat since our last review."
On February 23, the day before Russia launched its invasion into Ukraine, $1 was equivalent to 80 rubles, according to AP. On Thursday, 119 rubles were needed to get $1, an increase of nearly 40 in a little over two weeks.
The plummet in value came in spite of a decision by Russia's central bank to double interest rates to 20 percent, AP reported.
A Morgan Stanley official warned that Russia could default on its foreign debt by the middle of next month. A debt default usually makes it more difficult and costly to borrow in the future.
Newsweek reached out to the Russian Treasury and Russia's Ministry of Finance but did not hear back by publication time.
Update 3/10/22, 11:37 a.m. ET: This story was updated with additional information and background.
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Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
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Zoe Strozewski is a Newsweek reporter based in New Jersey. Her focus is reporting on U.S. and global politics. Zoe ... Read more
