Moody's Investors Service placed Russia's credit rating under review for a possible downgrade late on March 4, citing the "structural shock" from a prolonged drop in oil prices.
The review of Russia's Ba1 rating, which is already in junk-bond territory, was prompted by the further sharp fall in oil prices since the beginning of the year, the Wall Street ratings agency said. Moody's had affirmed Russia's Ba1 rating in December.
Oil prices have plunged another 40 percent since the beginning of the year after dropping by roughly half from levels over $100 a barrel between 2014 and 2015, Moody's said. Oil prices currently average around $30 a barrel.
"The structural shock to the oil market is weakening Russia's economy and its government balance sheet, and therefore also its credit profile," said Moody's Senior Vice President Kristin Lindow.
Oil and gas account for nearly 60 percent of Russia's exports and 43 percent of government revenue, the agency said.
Russia has moved aggressively this year to try to shore up oil prices, agreeing for the first time in decades to work with the OPEC oil cartel to try to freeze booming production levels that have caused a glut of oil on world markets and depressed oil prices.
But Moody's Lindow expects depressed oil prices to continue for several more years despite Russia's and OPEC's efforts, causing a further substantial decline in Russian government revenues.
That, in turn, will force the government to further deplete its fiscal reserves, and drive up federal deficits to 3 percent of economic output or higher, she said.
Lindow said she doubts Russia's plans to cut spending, hike excise taxes, and partially privatize some state-owned enterprises will suffice to close the growing budget gap.
That will force Moscow to borrow more, causing a 12 percentage point rise in Russia's debt burden over four years, Moody's estimated.
Because of international sanctions, the government will have to rely heavily on domestic sources of financing -- a high hurdle that Lindow said will be a particular focus of Moody's review.
The 27 percent depreciation of the ruble against the U.S. dollar since 2015 has helped to mitigate the shock on Russian government revenues from the drop in oil export earnings, but at the cost of higher inflation, Moody's said.
Yet the drop in the ruble's value has done little to increase Russia's competitiveness, it said, "given the structural problems facing the economy, in particular chronic underinvestment."
As a result, Moody's expects economic growth to average only 0.4 percent in the next four years, with Russia barely recovering from its deep recession since 2014.
Russia was not the only nation to get hit by plunging oil prices. Citing similar concerns with the fallout from oil prices, Moody's also placed the ratings of Kazakhstan, Saudi Arabia, Qatar, Kuwait, Nigeria, Angola, and United Arab Emirates on review for downgrade on March 4.
Moody's earlier in the week put China's credit ratings under review because of its slowing growth. Since China had been the fastest-growing consumer of oil and other commodities, China's slowdown has been blamed as a principle cause of the collapse in oil prices.