International ratings agency Standard and Poor's said Monday it had raised its rating on Russia to investment grade from speculative grade, and that the outlook was "stable" despite growing political risk. S&P raised its long-term foreign currency sovereign credit rating on Russia to 'BBB-minus' from 'BB-plus'. It also raised its short-term foreign currency sovereign credit rating on Russia to 'A-minus3' from 'B', its long-term local currency sovereign credit rating to 'BBB' from 'BBB-minus', and its Russia National Scale rating to 'ruAAA' from 'ruAA-plus'.

S and P is the third ratings agency to give Russia an investment grade, after Fitch and Moody's.

"The upgrade reflects recent, crucial improvements in the government's debt level and external liquidity," said S and P's credit analyst Helena Hessel.

"These improvements are so significant that they now outweigh the serious and growing political risk that continues to be a key ratings constraint on Russia."

The Russian government became a net creditor by end-2004, and its position was expected to improve further, partly due to the expected stability of a strong fiscal position from oil exports fetching continued high prices.

"The fact that Russian government became a net external creditor by the end of 2004 is an important rating consideration in the context of the continued political, institutional, and structural weaknesses the country faces," stressed Hessel.

"At this point, the financial flexibility afforded by the government more than offsets these other challenges."

The agency noted that the Russian government has a total debt servicing of the general external debt of 13.6 billion dollars this year, which will fall below 12 billion dollars in 2006 and 2007.

Copyright Agence France-Presse, 2005