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Oil price hardly matters for Russian Country Risk

By CreditMan Wednesday, November 2, 2016

The oil price decline has created headwinds for the Russian economy. However, the risk of doing business in Russia - as determined not only by economic but also by political and structural factors - has not changed substantially and there is therefore no evidence that the oil price decline had a significant impact on Russian country risk.

This is the conclusion reached by Atradius' study "Oil price hardly matters for Russian country risk", recently published by Atradius. The recently published study examines the correlation between the oil price and Russia's score on Euromoney Country Risk (ECR). Country risk grasps the probability that changes in the business environment of a country adversely impact operations or payment for imports, resulting in a financial loss. For the purposes of the study, Atradius has collected and analysed Euromoney data over the period 2011Q1-2016Q1.

As expected, the outcome of the correlation analysis found a significant positive relationship between the oil price and the economic aspects of the country risk measure. However, no such significant relationship was found for the political and structural aspects of the country risk. This means that the oil price decline is only of limited relevance for the Russian country risk, as the stability of the country's political institutions has mitigated the negative impact of the oil price decline on the economy of Russia. As a consequence, the Russian business environment has remained fairly stable, and the risk of doing business in the country has not been significantly affected.

Andreas Tesch, Chief Market Officer of Atradius N.V. comments, "While the low oil price has impacted the Russian economy its impact on country risk has not been significant and there remain good opportunities for businesses offering the right products and services to export to Russia. Higher insolvencies, and lingering trade sanctions however, amplify the importance of protecting your receivables with credit insurance or other forms of security."

The complete study "Oil price hardly matters for Russian country risk" can be downloaded free of charge from the [ ] website.