Moody's Upgrades Russian Bonds

Ratings agency Moody's upgraded Russia's government bond ratings Wednesday, citing a strong fiscal position and reduced political risk, and said it saw healthy economic growth continuing in the medium term.

Moody's upped bond ratings and the country ceiling for foreign currency deposits to Baa1 from Baa2 with a positive outlook.

It maintained Russia's A2 country ceiling for foreign currency bonds with a positive outlook and A1 country ceiling for local currency bonds and deposits with a stable outlook.

Energy exports have brought money pouring into the country. The price of oil rocketed to record highs over the past several years, and then-President Vladimir Putin's government put it to good use, building up reserves while paying off debts.

Moody's senior analyst for Russia, Jonathan Schiffer, said the country's direct debt was "relatively negligible" and "highly affordable," even if the debt of semistate firms is considered.

He also praised the smooth transfer of power in March, when after eight years of Putin's rule, Dmitry Medvedev took over.

"President Medvedev will continue, if not improve upon, the macroeconomic policy framework of former President Putin," Moody's statement said. "Russian political risk has diminished with the smooth transition."

"Russia is likely able to sustain a strong economic performance over the medium term," Schiffer said, noting a shift away from dependence on oil toward greater economic diversity and enthusiasm for structural reforms.

The country still has to fight soaring inflation -- at around 15 percent in annualized terms -- improve the business climate and tighten up efficiency, especially among corporations still linked to the state, the agency said.

It said it would keep a close eye on a mixed bag of factors, including private sector debt, inflation and diversification.

The Finance Ministry's deputy of the foreign debt department, Alexander Shcherbakov, said the rating could raise foreign investors' appetite for Russian debt.

"However, we think because the Moody's rating is raised to levels of ratings that have come from other agencies, the effect will not be so significant," he said.

Nikolai Podguzov, vice president of Renaissance Capital, said: "Nevertheless, at a time when global markets are entering the second stage of the credit crisis, this is a positive factor for the development of the country."

n Moody's on Wednesday lifted to Baa1 the long-term currency deposit ratings of Sberbank, VTB, VTB North-West, VTB-24, DeltaCreditBank, Rosselkhozbank, Vneshekonombank, Bank of Moscow, Gazprombank and Raiffeisenbank, Bloomberg reported.