Moody’s is withdrawing from the Russian domestic market as global rating agencies are caught in a dilemma between new Russian laws and western sanctions

Moody’s is withdrawing from the Russian domestic market as global rating agencies are caught in a dilemma between new Russian laws and western sanctions

Moody’s said on Wednesday that it would withdraw domestic credit ratings in Russia following “legislative changes and other potential restrictions” that affect the business of providing national scale ratings by its joint venture in the country, Moody’s Interfax Rating Agency

The decision from Moody’s marks the most drastic reaction so far to new Russian regulation of credit rating agencies, but highlights the risk that the country’s financial markets may become more isolated from global markets amid the tit-for-tat fallout of western sanctions against Moscow

National-scale ratings assess the creditworthiness of issuers and financial obligations within a country. Under legal amendments approved last year that take effect in 2017, Moscow will allow agencies to issue local ratings only through a subsidiary in the country that agrees to certain conditions, including a guarantee not to withdraw ratings under external political pressure

The legislation also requires central bank approval of the assignment and withdrawal of local ratings

The new rules could leave global rating agencies in violation of either western law or Russian law if applied to Russian issuers under US or EU sanctions