are achievable in large part because the government's oil price and revenue assumptions are sufficiently conservative.

Importantly, the government's conservative assumptions increase the likelihood that its fiscal buffers will be preserved going forward, in contrast to the trend expected one year ago when the negative outlook was assigned. The government has stated that it will spend only what was planned in its 2017 budget even though oil prices are higher than the $40/barrel assumed in the budget. In February, the authorities started buying foreign exchange with the "excess" rubles received in oil revenues above that price and are placing the money into deposits at the central bank, which could be used for deficit financing instead of or in addition to its existing foreign currency deposits in the Reserve Fundwhich include the government's remaining liquid foreign currency deposits, provide ample cover for external payment obligations. Russia's net international investment position (NIIP) is in surplus, a position that improved further to about 25% of GDP in 2015 from 15% of GDP in 2014 due primarily to the revaluation of foreign assets after the depreciation of the ruble. Among 'Baa-Ba'-rated sovereigns, Russia and only three other countries have positive NIIPs.

SECOND DRIVER: HIGH GEOPOLITICAL RISKS AND INSTITUTIONAL WEAKNESSES ARE FUNDAMENTAL RATING CONSTRAINTS

Despite its fiscal and external strengths, Russia's significant geopolitical risks continue to weigh on the country's creditworthiness, notably the ongoing conflict and territorial disputes in Ukraine, which suggest that a restoration of Ukraine's territorial integrity will be very difficult to achieve and which led to international financial sanctions, but