Fitch cuts Saudi Arabia's credit rating citing risk of further attacks
Saudi finance ministry expresses disappointment, urges Fitch to reconsider move
Saudi finance ministry expresses disappointment, urges Fitch to reconsider move. PHOTO: REUTERS
DUBAI:
Rating agency Fitch downgraded Saudi Arabia's credit rating to A from A+ on Monday, citing rising geopolitical and military tensions in the Gulf following an attack on its oil facilities and a deterioration of the kingdom's fiscal position.
The Saudi Arabian finance ministry said it was disappointed by the "swift" downgrade and urged Fitch to reconsider it, arguing the move did not reflect the kingdom's response to the September 14 attack or its capacity to handle adversity.
The move - which places Saudi Arabia one notch above the assessment of peer rating agency S&P Global - is a blow to the largest Arab economy as it seeks investment to diversify away from oil and prepares for a potential international sale of US dollar-denominated Islamic bonds.
It follows an unprecedented attack on Saudi oil plants which initially halved the crude output of the world's largest oil exporter. Riyadh blamed adversary Iran, a charge Tehran denies.
"In our view, Saudi Arabia is vulnerable to escalating geopolitical tensions given its prominent foreign policy stance, including its close alignment with US policy on Iran and its continued involvement in the Yemen war," Fitch said on Monday.
It saw a risk that the United States and Saudi Arabia could be drawn into a deeper conflict with Iran or its allies.
"Although oil production was restored fully by end-September, we believe that there is a risk of further attacks on Saudi Arabia, which could result in economic damage."
The finance ministry said the kingdom had shown "restraint and careful consideration" in its response and had acted immediately and effectively to maintain global oil supplies.
Saudi officials have said the September 14 strike would not affect state finances or growth, but investors and analysts said it could have a long-term impact on ambitious plans to diversify the Saudi economy and attract foreign capital.
"We have revised our assessment of the vulnerability of Saudi Arabia's economic infrastructure to regional military threats as a result of the most recent attack," Fitch said.
Fitch is the first agency to change Riyadh's credit rating - used by investors to assess the risk associated with a debt issuer - since the attacks, the most dramatic of several incidents this year raising Iranian-Saudi tensions.
S&P Global Ratings last week affirmed its A- (minus) rating, saying however that its rating could come under downward pressure should Saudi oil infrastructure be attacked repeatedly.
Rating agency Fitch downgraded Saudi Arabia's credit rating to A from A+ on Monday, citing rising geopolitical and military tensions in the Gulf following an attack on its oil facilities and a deterioration of the kingdom's fiscal position.
The Saudi Arabian finance ministry said it was disappointed by the "swift" downgrade and urged Fitch to reconsider it, arguing the move did not reflect the kingdom's response to the September 14 attack or its capacity to handle adversity.
The move - which places Saudi Arabia one notch above the assessment of peer rating agency S&P Global - is a blow to the largest Arab economy as it seeks investment to diversify away from oil and prepares for a potential international sale of US dollar-denominated Islamic bonds.
It follows an unprecedented attack on Saudi oil plants which initially halved the crude output of the world's largest oil exporter. Riyadh blamed adversary Iran, a charge Tehran denies.
"In our view, Saudi Arabia is vulnerable to escalating geopolitical tensions given its prominent foreign policy stance, including its close alignment with US policy on Iran and its continued involvement in the Yemen war," Fitch said on Monday.
It saw a risk that the United States and Saudi Arabia could be drawn into a deeper conflict with Iran or its allies.
"Although oil production was restored fully by end-September, we believe that there is a risk of further attacks on Saudi Arabia, which could result in economic damage."
The finance ministry said the kingdom had shown "restraint and careful consideration" in its response and had acted immediately and effectively to maintain global oil supplies.
Saudi officials have said the September 14 strike would not affect state finances or growth, but investors and analysts said it could have a long-term impact on ambitious plans to diversify the Saudi economy and attract foreign capital.
"We have revised our assessment of the vulnerability of Saudi Arabia's economic infrastructure to regional military threats as a result of the most recent attack," Fitch said.
Fitch is the first agency to change Riyadh's credit rating - used by investors to assess the risk associated with a debt issuer - since the attacks, the most dramatic of several incidents this year raising Iranian-Saudi tensions.
S&P Global Ratings last week affirmed its A- (minus) rating, saying however that its rating could come under downward pressure should Saudi oil infrastructure be attacked repeatedly.