Standard & Poor's Ratings Services affirmed its 'BB+' long-term issuer credit and 'ruAA+' Russia national sale ratings on Chelyabinsk Oblast, an industrial region in Russia's Urals Federal District. The outlook is stable.

The ratings on the oblast reflect our view of its low budgetary flexibility and predictability under Russia's developing and unbalanced system of interbudgetary relations. Economic concentration on metallurgy and exposure to a single taxpayer, OAO Magnitogorsk Metallurgical Kombinat (MMK; not rated), which leads to revenue volatility, and lack of reliable medium-term financial and capital planning also constrain the ratings.

The oblast's sound budgetary performance, very low debt burden, and a positive liquidity position support the ratings.

The stable outlook reflects our view that Chelyabinsk Oblast will adhere to its conservative financial policies and maintain sound budgetary performance, low debt, and a positive liquidity position, despite potential revenue volatility stemming from economic concentration.

We could take a negative rating action within the next 12 months if loosened control over operating expenditures leads to a structural deterioration of the oblast's budgetary performance, as well as decreasing spending flexibility.

We could take a positive rating action if better-than-forecast budgetary performance (in line with our upside case scenario), combined with documented cash policies, resulted in structural consolidation of the oblast's liquidity position, with the view to reducing the oblast's exposure to financial and cash volatility. However, ratings upside is unlikely for the next 12 months, in our view.

(Sourced from Thomson Reuters)