Russia’s Analytical Credit Rating Agency (ACRA) is part of a plan to build a financial system independent of the West that can succeed if it builds on a relationship with the Chinese economy and the Dagong credit rating agency, Die Welt reported.
“The Kremlin has repeatedly articulated its displeasure with the Western ratings agencies. The ratings that S&P’s, Moody’s and Fitch gave to companies after sanctions were immediately withdrawn.”
“Nine months later S&P and Moody’s lowered Russia’s credit rating to junk status, in view of the low oil price and Western sanctions. Moscow criticized the move as politically motivated, citing Russia’s debt to GDP ratio of 19 percent, among the lowest in the world.”
International rating agencies are currently deciding how to comply with new legislation passed by the Russian government that requires ratings agencies to localize their operations, setting up a subsidiary with accreditation in Russia that will issue ratings locally on Russian companies.
“The ratings scales that we have been using to for the past ten years will probably disappear,” Russian Deputy Finance Minister Alexey Moiseev explained last week.
“There will be international scales of the international ratings agencies, and a national scale that will be formed by agencies with accreditation,” Moiseev said.
The launch of ACRA in December 2015 will strengthen the Eurasian Economic Union between Armenia, Belarus, Kazakhstan, Kyrgyzstan and Russia, and is one of a number of steps being taken to increase financial independence from the US, including the institution of the BRICS’ New Development Bank and the transfer of national reserves from dollars to gold, Die Welt wrote.
“Russia is in good company with China. The eastern nation has also increased its gold reserves and set up a ratings agency, and the credit ratings of Dagong give a first glance at how the ACRA ratings might look: emerging powers like China, India or Brazil all get better grades than Western competitors.”
Dagong gives China an AAA rating, and Russia A; the biggest difference is the discrepancy in evaluation of US sovereign debt, which is given A-, lower than Russia.
Germany gets AA+ from Dagong, rather than the triple A rating it gets from Western ratings agencies.
While Die Welt quotes one investment strategist, Timothy Ash of the Japanese Nomura financial services group, who said that “the new agency will be ignored just like Dagong,” other market strategists said that ACRA can succeed in acting as an international counterweight to US-based agencies.
“The Russian agency has an advantage that many other attempts to create such an agency didn’t have: the presence of a giant Chinese economy that can directly recognize the agency and bring its standard into play,” said Bjorn Marquardt, an investment strategist for the Sparkassen Group.