Russian Economic Crisis Has 'Little Impact' to US Economy

The U.S. Federal Reserve believes the economy is safe from a major spillover from the Russian economic crisis. As major credit rating companies considers downgrading Russia, one Chinese company believes otherwise.

Even if Russia is burdened with an economic crisis due to the falling rouble and oil prices, it does not necessarily mean the country is less creditworthy than the United States. A Chinese debt-rating company has decided to maintain its "A" credit rating of Russia with a stable outlook. According to Dagong Global Credit Rating Co., the debt repayment environment in Russia may have somewhat "deteriorated" but it is predicted to become stable in the medium term. In an emailed statement to Bloomberg Businessweek, Dagong believes Russia's domestic credit environment will eventually recover as Russia's economy and monetary policy returns to normal.

The Chinese credit rating company has previously downgraded the U.S. government debt to "A-" in October 2013. Compared to a 3 percent growth in the U.S. economy, Russia's economy is expected to contract 1.8 percent in 2015. Dagong's positive outlook is in contrast with the biggest credit rating companies. Standard & Poor has earlier announced it may lower Russia's rating to a non-investment grade within 90 days.

Standard & Poor has said there is at least a 50 percent chance that it will lower Russia's debt to junk status as it expects to complete its evaluation by the mid-January. Russia was placed on a negative credit watch due to concerns about the country's banking system.

Dagong's rating appears to support China's efforts to offer assistance to Russian President Vladimir Putin. The world's largest economy has expressed support for its ally and Foreign Minister Wang Yi has remained confident that Russia will survive the current crisis.

Despite concerns of the Russian crisis having a major impact on the U.S. economy, previous reports have indicated that Federal Reserve Chair Janet Yellen believes it has little effect on the U.S. She and her colleagues discussed Russia's economic crisis in a policy meeting and arrived at the conclusion. Among the possible spillover scenarios they considered include financial and trade links but Yellen said they appeared to be "relatively small," Bloomberg reported.

Yellen explained that banks in the U.S. have little exposure to Russian residents and is relatively small based on capital. Although U.S. residents have portfolios of Russian securities, they are very small to be considered significant. Russia's financial markets were crippled by U.S. and EU sanctions due to the Ukraine conflict.

Contact email: r.su@ibtimes.com.au