Russia’s investment-grade credit rating was affirmed by Standard & Poor’s, dispelling concern that a downgrade to junk may deepen a selloff in the ruble and other assets.

S&P held Russia’s ranking at BBB-, according to a statement Friday, while retaining the country’s negative outlook. The grade puts Russia on par with Brazil and South Africa. S&P last cut the rating in April, downgrading Russia for the first time in five years.

“The ratings are supported by the economy’s net external asset position and the Russian government’s modest net debtor position,” S&P said in the statement. “The ratings remain constrained by our view of the structural weaknesses in Russia’s economy, in particular the strong dependence on hydrocarbons and other commodities.”

Penalties enacted by the U.S. and the European Union for Russia’s alleged role in the Ukraine conflict have locked the country’s corporate borrowers out of international debt markets, pushing the $2 trillion economy to the brink of its first recession since 2009. The ruble has been the worst-performing currency since June as tumbling oil prices have exacted a toll on the world’s biggest energy exporter.

Russian stocks trading in New York extended gains after S&P’s announcement, rising 0.4 percent at 1:01 p.m. The ruble pared losses, trading at 41.8135 against the dollar. It has depreciated 19 percent since the end of June, the biggest decline among 31 major currencies.

‘Not Sustainable’

“Chances are the rating will be cut when S&P meets at the end of the year,” Ian Hague, founding partner at Firebird Management LLC, which oversees about $1.1 billion including Russian stocks, said by phone. “The rate at which the central bank spends its reserves to prop up the currency is not sustainable longer term.”

The Russian central bank has spent more than $17 billion this month to slow the currency depreciation, according to Sberbank CIB. Russia’s international reserves last week tumbled $7.9 billion, the biggest drop in more than five months, as the central bank sold foreign currency to support the ruble. The value of the stockpile has slumped about 13 percent this year to $443.8 billion.

Capital Outflow

Net capital outflow reached about $85 billion in the nine months through September, compared with $61 billion in the whole of last year and the most since the collapse of Lehman Brothers Holdings Inc. in 2008 triggered the biggest credit squeeze since the Great Depression.

“The market’s rallying in the absence of an S&P cut, but all the factors that led the market to believe there was going to be a cut are still in place,” Hague said.

The yield on Russia’s dollar bond maturing in September 2023 fell 11 basis points to 4.98 percent today, paring a 76 basis-point increase since a June low. Credit default swaps insuring the nation’s debt against non-repayment climbed 8 basis points to 263.86.

“The outlook remains negative, reflecting our view that we could downgrade Russia over the next 18 months if its external and fiscal buffers deteriorate at a faster pace than we currently expect, for example due to any further tightening of sanctions as a result of the conflict in Ukraine,” S&P said. “If we see Russia’s monetary policy or exchange rate flexibility weakening, we could also lower the ratings.”

Moody’s Cut

S&P’s decision follows last week’s move by Moody’s Investors Service to cut Russia’s credit score one level to its second-lowest investment grade, citing concern sanctions over Ukraine will hurt the economy. The continued erosion of Russia’s foreign-exchange reserves because of capital flight, low oil prices and borrowers’ lack of access to credit were among reasons that prompted the rating cut, according to Moody’s, which downgraded Russia for the first time since 1998.

Russia considers the Moody’s move unfair, the state-run news service RIA Novosti reported, citing Deputy Finance Minister Alexey Moiseev. In 2011, President Vladimir Putin called Russia’s debt rankings an “outrage” that increased borrowing costs for both domestic companies and the government.

Russia can withstand challenges as its economic and financial situation remains stable, Economy Minister Alexei Ulyukayev said Oct. 14, according to the news service Interfax. There’s no risk of Russia failing to redeem its external debt, according to Ulyukayev.