Moody’s Investors Service downgraded Russia’s sovereign debt rating to junk status on Friday, assigning a rating of Ba1 — from its previous rating of Baa3 — with a negative outlook.

Moody’s said in a statement the reason for the downgrade to junk status was due to impaired prospects for the nation’s economy, further erosion of fiscal strength and foreign currency reserves, in addition to unpredictable political dynamics.

Moody’s said it sees the existing and potential future international sanctions on Russia, the erosion of the nation’s foreign exchange buffers, and persistently lower oil prices alongside high and rising inflation will take a negative toll on incomes as well as business and consumer confidence. As a result, Moody’s expects Russia to experience a deep recession in 2015 and a continued contraction in 2016. The decline in confidence is likely to constrain domestic demand and exacerbate the Russian economy’s already chronic underinvestment.

More from Moody’s:

Moody’s downgrade of Russia’s government bond rating to Ba1 is driven by the following factors: (1) The continuing crisis in Ukraine and the recent oil price and exchange rate shocks will further undermine Russia’s economic strength and medium-term growth prospects, despite the fiscal and monetary policy responses; (2) The government’s financial strength will diminish materially as a result of fiscal pressures and the continued erosion of Russia’s foreign exchange (FX) reserves in light of ongoing capital outflows and restricted access to international capital markets; (3) The risk is rising, although still very low, that the international response to the military conflict in Ukraine triggers a decision by the Russian authorities that directly or indirectly undermines timely payments on external debt service. The assignment of the negative outlook reflects the potential for more severe political or economic shocks to emerge, related either to the military conflict in Ukraine or a renewed decline in oil prices, which would further impair Russia’s public and external finances.

Following Moody’s announcement of the downgrade to junk status, Russian Finance Minister Anton Siluanov responded by saying the decision by Moody’s was “overly negative”, TASS news agency reported.

“I believe that Moody’s decision is not just overly negative, but also based on an extremely pessimistic forecast, unparalleled these days,” Siluanov said.

“Apparently the information about the condition of Russia’s economy and its budget policies, which was provided to the agency to the fullest extent, has been ignored,” the Finance Minister said.

The Finance Minister stressed that Moody’s downgrade was unlikely to cause any significant changes on Russia’s capital market, Sputnik news agency reported.

“We believe that the agency’s decision will not have any additional major impact on the capital market,” Siluanov said.

“The Finance Ministry considers the reasons for the decision to lower the sovereign rating of the Russian Federation unrealistic. The presented forecast, which formed the basis of the [Moody’s] agency’s conclusions significantly surpasses, in the degree of pessimism, all existing ratings of international financial organizations and the world’s leading investment banks,” the finance ministry stressed.

Early on Saturday morning, a senior Russian legislator, Aleksei Pushkov — the chief of the Russian State Duma’s foreign affairs committee — posted on Twitter that he believes that political motives were behind the latest decision by Moody’s to cut the nation’s rating to junk, stating that Moody’s was likely given the green light by U.S. Senator John McCain or U.S. Vice President Joe Biden.

Есть ощущение, что рейтинги Муди'з пишут то сенатор Маккейн, то Джо Байден. Все настолько политически заряжённое, что доверять им невозможно — Алексей Пушков (@Alexey_Pushkov) February 20, 2015

“One has the impression that Moody’s ratings are authored either by Senator McCain or by Joe Biden. It all looks so politically charged that just cannot be trusted,” Pushkov tweeted on Saturday.