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‘The Big Three’ have all downgraded Gazprom, but China’s Dagong ratings agency recently issued the company its highest rating

Standard & Poor’s rating agency today downgraded Russia’s state-owned oil and gas giant Gazprom (ticker: OGZPY) and a number of other major Russian companies, joining Moody’s and Fitch in a series of credit downgrades directed at the Russian oil and gas industry.

S&P dropped Gazprom’s foreign currency ratings to BB+/B from BBB-/A-3 and local currency ratings to BBB-/A-3 from BBB/A-2, with negative outlooks. The rating agency said that its decision to lower the credit ratings of the Russian companies was due to their role and links with the Russian state, which the company also recently downgraded to BBB-/A-3, according to the company’s report.

The news follows similar decisions from Moody’s on January 20, and Fitch on January 13, in which both companies decided to lower the credit rating of Gazprom and other Russian oil and gas majors like Rosneft (ticker: RNFTF). Both companies echoed the S&P decision, saying fears about the weakening of the overall Russian economy and the possibility of government intervention if the economy continues to deteriorate led to their decision to downgrade Gazprom and its peers.

Big Three downgrades ‘are politically motivated’ – President, Dagong Global rating agency

Guan Jianzhong, president of China’s Dagong Global rating agency, told Russian news agency TASS in an interview on Wednesday that he thought the ratings downgrades by the Big Three U.S. credit agencies were politically motivated, and disregards the real state of the country’s economy.

“We believe that the downgrades of Russia’s rating by the Big Three rating agencies … are politically motivated,” Jianzhong said. “I believe there are no preconditions for these downgrades.” According to Dagong’s president, the economic conditions in Russia are being caused by outside factors like sanctions, and Russia’s economic development is normal.

Dagong upgraded Gazprom to its highest credit rating, AAA, on February 2. The agency said that its rationale for this decision was based on Gazprom’s “extremely strong wealth creation capability, and the very low degree of deviation between its available repayment sources and wealth creation capability.” The upgrade was accompanied by a “stable” outlook for Gazprom’s long-term credit rating over the next 1-2 years.

China’s Upgrade Clears the Way for Gazprom to List on the Hong Kong Stock Exchange

Jianzhong also said Russia’s “shift to the East” strategy will open broad prospects for the company in the Asia-Pacific region, reports TASS. “This will allow Gazprom to stabilize and improve its mid-term and long-term profitability,” he said. Jianzhong went on to say that the European Union would not target Gazprom with further sanctions due to their dependence on the Russian major for their gas supply.

Dagong is one of China’s leading rating agencies and its ratings are recognized by the Chinese government. The upgrade to AAA allows Gazprom to list its stock in Hong Kong, a tremendous boon for the company after it was cut off from Western investment due to the current sanctions regime in place targeting Russia for its actions in Ukraine.

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Important disclosures: The information provided herein is believed to be reliable; however, EnerCom, Inc. makes no representation or warranty as to its completeness or accuracy. EnerCom’s conclusions are based upon information gathered from sources deemed to be reliable. This note is not intended as an offer or solicitation for the purchase or sale of any security or financial instrument of any company mentioned in this note. This note was prepared for general circulation and does not provide investment recommendations specific to individual investors. All readers of the note must make their own investment decisions based upon their specific investment objectives and financial situation utilizing their own financial advisors as they deem necessary. Investors should consider a company’s entire financial and operational structure in making any investment decisions. Past performance of any company discussed in this note should not be taken as an indication or guarantee of future results. EnerCom is a multi-disciplined management consulting services firm that regularly intends to seek business, or currently may be undertaking business, with companies covered on Oil & Gas 360®, and thereby seeks to receive compensation from these companies for its services. In addition, EnerCom, or its principals or employees, may have an economic interest in any of these companies. As a result, readers of EnerCom’s Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this note. EnerCom, or its principals or employees, may have an economic interest in any of the companies covered in this report or on Oil & Gas 360®. As a result, readers of EnerCom’s reports or Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this report.