S&P Upgrades Russia to 'Positive'

Standard & Poor's Ratings Services on Tuesday revised Russia's long-term rating to "positive" from "stable" on its fiscal reserves.

"The outlook revision reflects our expectation of further growth of the country's already substantial fiscal and external reserves," S&P said in an e-mailed statement.

Russia, the world's biggest crude oil and natural gas exporter, has benefited from high prices for the commodities. The budget surplus stood at 5.5 percent of gross domestic product last year, according to the Finance Ministry. The value of foreign currency and gold reserves had reached a record $490.7 billion by Feb. 29.

"While early 2008 nominal-expenditure growth continued to be extremely high, our expectation is that it will moderate" later this year, the statement said. The government's cash surplus will probably reach at least 4 percent of GDP, according to S&P.

The ratings agency also said that the dependence of Russian corporations on external markets for refinancing was "a key risk for the stability of Russia's banking system and the real economy," because of the "closure" of global debt markets.

The government is "able to control this situation" with companies' foreign debt, said Konstantin Vyshkovsky, chief of the Finance Ministry's international financial relations department.

"The volume of accumulated reserves and the level of financial stability allows us to control this process fully," Vyshkovsky told reporters Tuesday. The situation in Russia "has no parallels to the Asian crisis when the roots of global instability stemmed from the private sector."

Authorities may tap the newly created National Welfare Fund to recapitalize some "distressed financial institutions," S&P said.

"The government's role as a source of emergency funding for financial institutions is likely to rise considerably over the next three years," the ratings agency said.

The National Welfare Fund, a sovereign energy fund formed in January to finance pension savings, had accumulated $32.22 billion by March 1, according to the Finance Ministry.

There is "no mechanism" for using the National Welfare Fund to boost the capital of the country's financial institutions, Vyshkovsky said. The Finance Ministry's international financial relations department, which oversees sovereign funds, is not working on developing such mechanisms, he said.

Energy, including oil and gas, accounted for 75 percent of Russia's January exports to the Baltic states and countries outside the former Soviet Union, according to the Federal Customs Service.

President Vladimir Putin ordered an improvement in the management of the country's sovereign funds and currency reserves during a Cabinet meeting earlier this month. "There won't be anything revolutionary here, but we must react to what is going on in the global economy," Putin said March 3.