S&P Warns Russia Over Using Funds

NEW YORK -- Standard & Poor's warned Russia on Thursday that its BBB+ sovereign credit rating would be put at risk if Moscow uses money from its national wealth and pension funds to support battered financial markets.

S&P's statement was made in response to Finance Minister Alexei Kudrin's comment earlier Thursday that Russia was considering using the cash to buy securities in the domestic market, which has suffered a significant drop in value this year.

"Any use of public funds -- including the National Welfare Fund, which was originally established to shore up Russia's inadequately capitalized pension system -- to prop up asset values in financial markets would carry negative implications for Russia's sovereign rating," S&P said in a statement.

The ratings agency said it suspected Kudrin's statements were an attempt at verbal intervention to stabilize the markets and therefore bore no implication for the investment grade rating.

The benchmark RTS Index is down more than 43 percent so far this year.

Investors in Russia have been unsettled by a combination of falling commodity prices, rising government involvement in business and the country's brief war with Georgia.

Russia's gold and forex reserves totaled $573.6 billion in the week to Sept. 5, in part as a result of the Central Bank selling dollars to stop the ruble from weakening.

But around $175 billion of that is taken up by two oil-wealth funds that are controlled by the Finance Ministry and thus are not available to the Central Bank for spending.

"Russia's very substantial fiscal and monetary reserve buffers are a key ratings strength and are more important than ever given the potential need to recapitalize the weaker parts of the financial system," S&P said.

S&P said the government's selective launch of investigations into private-sector corporations highlight the possibility that Russian enforcement of shareholder and property rights "is becoming increasingly unpredictable, lowering Russia's attractiveness as a destination for direct investment.