New York, February 17, 2017 -- Moody's Investors Service ("Moody's") has today changed the outlook on Russia's Ba1 government bond rating to stable from negative. Moody's also affirmed Russia's government bond rating and issuer rating at Ba1 and the short term rating at Not Prime (NP).

RATINGS RATIONALE

The main driver for changing the outlook on Russia's Ba1 government bond rating to stable from negative is the government's enactment of a medium-term fiscal consolidation strategy that is expected both to lower the government's dependence on oil and gas revenues and to permit the gradual replenishment of its savings buffers. In addition, the Russian economy is now recovering after a nearly two-year-long recession. Moody's believes that, when combined, those two factors have eased the downside risks the rating agency had identifiedlast year when it assigned the negative outlook.

The rationale for affirming Russia's government rating at Ba1 balances the country's inherent credit strengths, notably the economy's sheer scale and wealth as well as its healthy fiscal and external positions, against limited economic growth potential. In that regard, the government has not yet implemented a long-promised set of structural reforms, a delay that deters investment and subdues economic activity. Russia's high susceptibility to geopolitical risk, with associated spillover to volatility in the real economy and financial markets, and relatively weak institutions also constrain its sovereign rating.

Russia's country ceilings remain unchanged at Ba1/NP (foreign currency bonds), Ba2/NP (foreign currency bank deposits) and Baa3 (long-term local currency debt and deposits).

RATIONALE FOR CHANGING THE OUTLOOK TO STABLE FROM NEGATIVE

In April 2016, Moody's confirmed