
The presence of Russian troops (rated Baa3 stable) along the border with Ukraine (B3 stable) carries the risk of tensions escalating into a military conflict, which is likely to provoke sanctions from Western governments and retaliation from Russia, including possible interruption of energy supply.
This is stated by Moody’s Investors Service in a report published today, analyzing the impact that all this may have on the rating of countries. These remarks are of particular importance, given the goal of Greece gaining an “investment grade” by 2023. Moody’s “rates” Greece with Ba3 and a stable outlook.
The report’s authors note that given Europe’s dependence on Russian hydrocarbon imports, energy supply is likely to be a major threat to the rating, although some countries are also vulnerable to trade disruptions and security risks, especially cyber attacks. According to the report, Greece faces “high risk” in terms of energy, but “very low” in the other two components.
Which countries are the most exposed
The Baltic and Central and Eastern European (CEE) countries are most exposed through all three of these channels, but these risks have already been taken into account to a greater extent in Moody’s ratings so far.
In the basic scenario of the agency, the Russia-Ukraine tensions will stop before the military conflict and the risk of degradation is low, unless such a conflict continues for a long time or escalates into an absolute conflict beyond Ukraine.
The main points of the report are the following:
An escalation of tensions will affect the credit rating through three main channels
The Baltic states are more exposed to Europe, but several factors support their resilience
Poland’s geographical proximity and strained relationship with Russia increase its exposure
Exposure to energy increases risks for other Central and Eastern European countries
Security and energy risks are low for non-NATO Sweden and Finland, but Finland’s trade fair is moderate
Germany is heavily dependent on Russian gas supplies
Austria, Italy and Greece are also exposed to energy-related risks
According to the report, Russian imports account for 46% of Europe ‘s solid fuels (such as coal), 38% of its natural gas and 26% of its crude oil. As a result, any decision by the Russian authorities to reduce energy supply in order to gain political leverage or in response to EU sanctions would have a significant impact on EU energy supply.
Damage to physical infrastructure is another risk, as most EU gas supplies from Russia pass through pipelines passing through Ukraine. In particular, the gas shutdown would significantly but temporarily weaken the EU economy, as it is a critical fuel for electricity generation in Europe and a key heating fuel for households.
Pressure on the ECB
Pressures could also increase pressure on the ECB and other central banks to tighten monetary policy if they began to lower inflation expectations. The negative effects on tax revenue will also be borne by public finances. The pressure will intensify if governments decide to introduce additional support measures such as price caps or subsidies.
According to the report, financial markets would also react to any disruption by raising risk premiums, which would lead to higher borrowing costs for some countries and could also worsen the house’s assessment of government liquidity risk.
The position of Greece
The report notes that both Germany and Austria (stable Aa1), Italy (stable Baa3) and Greece (stable Baa3) are heavily exposed to disruptions in Russian energy supplies, mainly natural gas. While Austria has stopped publishing information on its gas imports by country of origin for reasons of confidentiality, the available figures from Eurostat up to 2013 show that about 60% of total Austrian gas imports come from Russia. However, Austria’s lower share of dependence on oil and gas and a much larger contribution from renewable energy sources reduce the risks involved.
By contrast, oil and gas account for more than 75% of total energy supply in Italy and Greece. Both countries also import most of their energy (73% and 82% of total gross domestic energy consumption, respectively). For Greece, Russia accounts for 26% of oil imports and 39% of natural gas imports. They also see the risk of Italy, Greece or Austria facing security threats with substantial negative credit impact as extremely limited, mainly due to their geographical location in southern and central Europe.


Latest News

Trump Tariffs Jeopardize Growth: Piraeus Chamber of Commerce
The tariffs, aimed at reducing the U.S. trade deficit, are expected to have both direct and indirect effects on the European economy

EU Condemns Trump Tariffs, Prepares to Retaliate
As tensions escalate, the EU is expected to continue negotiations with Washington while preparing for potential economic retaliation.

The Likely Impact of Trump Tariffs on Europe and Greece
Trump tariffs are expected to negatively affect economic growth in the Eurozone while Greece's exports could take a hit.

Motor Oil Results for 2024: Adjusted EBITDA of 995 mln€; Proposed Dividend of 1.4€ Per Share
Adjusted EBITDA for 2024 was down 33% yoy. The adjusted profit after tax for 2024 stood at 504 million euros, a 43% decrease from the previous year

Cost of Living: Why Greece’s 3% Inflation Is Raising Alarm
Greece appears to be in a more difficult position when it comes to price hikes, just as we enter the era of Trump’s tariffs.

Fitch Ratings Upgrades the Four Greek Systemic Banks
NBG’s upgrade reflects the bank’s ongoing improvements in its credit profile, Fitch notes in its report, including strong profitability, a reduction in non-performing exposures (NPEs), and lower credit losses

Trump to Announce Sweeping New Tariffs Wednesday, Global Retaliation Expected
With Trump's announcement just hours away, markets, businesses, and foreign governments are bracing for the fallout of one of the most aggressive shifts in U.S. trade policy in decades.

Inflation in Greece at 3.1% in March, Eurostat Reports
Average inflation in the eurozone settled at 2.2%, compared to 2.3% in February

Greece’s Unemployment Rate Drops to 8.6% in February
Despite the overall decline, unemployment remains higher among women and young people.

Jerry Kalogiratos Highlights Key Role of Energy Transition and Data Demand in LNG Outlook
Energy transition and the prospects of LNG were discussed at Capital Link’s 19th Annual International Maritime Forum, during a panel discussion with Jerry Kalogiratos (Capital Clean Energy Carriers Corp.)