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China Warns Russia’s Ukraine War Spending Could Empty Reserves and Trigger Default

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Photo of Vlad Litnarovych
Vlad Litnarovych
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China Warns Russia’s Ukraine War Spending Could Empty Reserves and Trigger Default
A Russian ruble coin is seen in Red Square in Moscow, Russia on March 19, 2020. (Source: Getty Images)

China’s leading credit-rating house is warning that Moscow’s widening war in Ukraine could drain Russia’s financial reserves and push the country’s debt profile to the brink of default, China Chengxin International Credit Rating (CCXI) assigned the Kremlin a sovereign grade of BBB+g—its first public rating of Russia since the full-scale invasion began on May 12.

CCXI describes the new mark as “mid-level” credit quality, signaling moderate default risk.

Notably, the grade sits one notch higher than the BBB-g level Russia held before February 2022, reflecting the agency’s view that the economy has so far adapted to Western sanctions through aggressive fiscal and monetary measures and a wartime boom in defense production.

CCXI credits Russia’s sizable international reserves, National Wealth Fund assets, and tight monetary policy for helping the government keep servicing foreign debt.

But the report flags “significant vulnerabilities” ahead: soaring military outlays, a labor squeeze and persistent inflation threaten to unbalance supply and demand, erode buffers, and force heavier borrowing.

If the fighting intensifies, CCXI cautions, Russia could burn through reserves and lose control of its debt trajectory—conditions that “may culminate in a sovereign default.”

Looking into 2025, the Beijing-based agency forecasts only modest economic growth and a slight dip in inflation, assuming the central bank holds its key rate near 21 percent. A future upgrade, CCXI says, would require an easing of sanctions or a palpable reduction in geopolitical tensions—neither of which is on the horizon.

Earlier, in February 2025, Russia’s budget deficit increased by 60% compared to January 2025. Budget revenues are insufficient due to rising expenditures amid declining oil and gas revenues.

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