Fitch today cut the outlook on Russia's debt due to uncertainty over protests against Prime Minister Vladimir Putin's rule which has intensified the risk of a sustained capital flight.
"Political uncertainty in Russia has risen and the global economic outlook has worsened since Fitch last affirmed the rating in September 2011," Fitch sovereign group director Charles Seville said.
The agency affirmed its BBB rating on Russia's long-term debt but lowered the outlook to 'Stable' from 'Positive' as it noted "the limitations and risks associated with Russia's political model."
Russia's largest protests in nearly two decades followed allegations of fraud in the December 4 election to the State Duma (lower house of parliament) in which the ruling party clung on to a narrow majority.
But their focus has increasingly turned to criticism of Putin himself as he campaigns for an historic third term as president in March 4 elections. Fitch said there seemed little doubt that Putin - a known quantity to the markets who served two presidential terms between 2000 and 2008 - would still win the vote.
It noted however that he appeared to have been caught off guard by the unrest and therefore the outlook was more unpredictable.
"It is unclear how the country's leadership will respond to the unexpected wave of protests triggered by the elections to the Duma on 4 December and to the broader shift in the political landscape." It added that "political uncertainty increases the risk of capital flight, which could put greater pressure on Central Bank of Russia reserves and the rouble."
Russia's net private sector capital outflows soared last year to $84.2 billion - the highest figure since the 2008 global financial crisis.