S&P has reduced Russia's rating by one notch to BBB-, or one grade above junk level, and kept the country's outlook at negative.
The agency cited the risk of further capital flight due to the Ukraine crisis. In Q1, outflows doubled on year to $50.6B and the government has forecast that the full-year figure could hit $70-100B. An increase in sanctions on Russia could also prompt S&P to further reduce the country's rating.
S&P's action comes a day after Russia began military exercises on its border with Ukraine in response to the latter's security forces killing five pro-Moscow rebels during its attempts to reassert control over the eastern part of the country. The developments have increased fears that Russia may invade eastern Ukraine, the nation's industrial heartland.
Russia's Micex index is -1.6% and the USD-RUB is +0.4% at 35.925 rubles.