By Marc Jones

LONDON, (Reuters) – The threat of credit rating pressures resulting from current tensions between Russia, Ukraine and other countries is very low according to Moody’s (NYSE 🙂 Wednesday. This statement was made unless the situation persists for an extended time or escalates in other countries.

Moody’s believes that Russia’s oil, gas, and coal supply will be the main channel by which Europe’s economy would be affected by conflict. However, some countries, such as cyberattacks, are vulnerable to disruptions in trade and other security threats.

Moody’s stated that “our baseline view is Russia-Ukraine tensions would stop short of outright military conflict,” in a report about the wider impact of the crisis.

“And the likelihood of material credit pressures arising is low, unless such conflict continued for an extended period of time or escalates into outright war beyond Ukraine.”

Additionally, it stated that central and eastern Europe, as well as the Baltics, were the most susceptible to security, energy and trade strains. However, those risks are largely covered in their credit ratings.

However, problems could arise if the situation gets worse.

Russia supplies 38%, 26%, and 46% respectively of Europe’s solid fuels, such as coal. Moody’s has cited.

Moscow could make any move to decrease those supplies as a way to get political leverage or respond to European sanctions. This is especially true considering that the European Union’s terminal capacity of liquefied gas (LNG), only covers around a quarter to total demand.

The report stated that even a short decrease in gas supplies would lead to an increase in energy prices. These have already skyrocketed.

A heightened inflationary pressure could cause the European Central Bank or other central banks to raise their interest rates. It would slow down economies, and increase debt.

The impact on public finances from the tax revenue drop-offs would also be significant. Moody’s said that additional support measures such as price caps and subsidies would only increase the pressures.

But, the biggest risk would be for other ex-East Bloc countries to become involved with Russia.

Moody’s stated that “In an extremely unlikely and extreme situation, an outbreak of armistice between Russia and Ukraine might spill over into EU nations neighbouring them,” Moody’s warned. The warning was made in reference to Poland and the Baltic States because of their proximity and past history of tension with Russia.

This scenario, although unlikely due to the presence of NATO troops within the most vulnerable EU countries, could have serious consequences for credit scores.