The sharp rise of the key interest rate has increased the country risk for Russian companies — their valuations are now roughly half those of comparable foreign firms, according to analysts at Kept (formerly KPMG). However, the situation may improve in the coming years if interest rates fall and inflation slows.

Photo: Oleg Yakovlev / RBC

Companies on the Russian market in 2025 are valued at about twice less than their global peers due to a significant country discount, says a new study by consulting firm Kept reviewed by RBC. One of the key indicators of country risk is the long-term real interest rate, which currently remains at its highest levels in Russia, the experts note.

“In 2025, the valuation discount for Russian assets related to country risk amounts to 1.9 times compared to similar assets in developed markets,” Kept analysts concluded.

They estimate Russia’s country risk premium at 10%, compared to about 2% in developed economies. “Country risk reflects the uncertainty of investing in a particular country and the extent to which that uncertainty may lead to investor losses,” Kept explains. This uncertainty stems from multiple factors — political environment, macroeconomic stability, and the protection of property rights, the report says.

As inflation moderates and interest rates decline, Kept expects the level of country risk to fall roughly threefold, which could lead to a substantial revaluation of Russian companies.

Some experts interviewed by RBC consider Kept’s estimate conservative, suggesting a risk premium closer to 12%, but they also expect a notable decline over time. However, they caution that monetary easing alone may not be sufficient — geopolitical conditions and the overall investment climate will play an equally important role.

What Determines Country Risk

Typically, country risk is assessed using the prices of foreign-currency-denominated securities (such as eurobonds or credit default swaps). However, amid sanctions and the absence of trading in Russian sovereign eurobonds, Kept used a synthetic approach, basing its calculation on the real interest rate in the economy. The same method was applied to developed markets for comparability.

“The real interest rate reflects the premium demanded by capital market participants to compensate for the risks of investing in a given country’s assets — including the probability that actual inflation will exceed expectations,” Kept explains. The indicator is derived from yields on long-term OFZ bonds adjusted for expected inflation. Based on these inputs, Kept calculated Russia’s country risk premium at around 10%.

Each additional percentage point of country risk reduces company valuation: “An increase of one percentage point in country risk corresponds to a decrease of 0.2x–0.3x EBITDA in enterprise value for countries with around 10% risk (like Russia in 2025) and 0.9x–1.6x EBITDA for countries with around 2% risk (developed markets),” Kept estimates.

The EV/EBITDA multiple represents the ratio of a company’s fair value to its earnings before interest, taxes, depreciation, and amortization, serving as a key measure of how the market values a business.

Expert Opinions

Experts interviewed by RBC say Kept’s assessment may even understate the reality. “According to data from Aton, Russia’s P/E discount is 2.2x vs South Korea, 2.8x vs Germany, and 4.2x vs the U.S.,” said Alexey Kupriyanov, Director at Aspring Capital.

Tatiana Simonova, portfolio manager at General Invest, estimates the country risk premium at 12%, based on a risk-free rate of 15% and an expected equity market return of 27–28%. She notes that the premium reflects factors such as geopolitics, monetary policy, sovereign debt risk, and currency volatility. The real-rate method used by Kept is valid under current conditions but “largely omits geopolitical risk, which can vary widely,” Simonova adds.

According to Andrey Goncharenko, Deputy CEO of PSK-Solutions, country risk also differs by sector: it is lower for exporters with foreign-currency revenues and higher for import-dependent or heavily regulated companies. “We estimate the gap between real rates in Russia and those in developed markets at about 8–9 percentage points. Adding 1–2 p.p. for institutional factors such as regulatory predictability, investor protection, and capital movement restrictions, the total risk premium of around 10% seems reasonable,” Goncharenko said.

Different investor groups may perceive risk differently, adds Alexander Ermolenko, partner at law firm Orlova\Ermolenko. “In today’s global confrontation, for some investors, country risk has become prohibitive, while for others, it’s precisely what opens new market opportunities,” he said.

Meanwhile, for closed or semi-closed economies, the concept of country risk may have limited relevance since it is based on assumptions of open market economies, notes Kupriyanov. “According to Aswath Damodaran’s estimates, North Korea’s country risk premium is around 18%, and Cuba’s about 16% — though these figures are based on synthetic models rather than actual market data,” he said.

Will Russian Companies Become More Expensive?

Kept expects Russia’s country risk to gradually decline. “Long-term forecasts by international agencies project 10-year OFZ yields to fall from roughly 15% in 2025 to about 10% in 2026, and then steadily down to 7% by 2030. Combined with inflation forecasts, this implies a decrease in country risk from around 10% in 2025 to 5.5–6% in 2026, and then to about 3% by 2030,” the firm predicts.

If this scenario materializes, Russian business valuation multiples could increase by 1.6 times by 2030, according to Kept. “Given the current dividend yields, leverage effects, inflation, and potential economic growth, the expected total return for investors buying Russian equities at 2025 prices could reach around 30% per year,” the analysts estimate.

Positive factors include not only macroeconomic improvements but also geopolitical normalization, easing of sanctions, access to global capital markets, and a better investment climate, Simonova adds.

“If monetary policy becomes more accommodative and inflation expectations stabilize, country risk could decline and valuations of Russian businesses could rise by 50–60%, even without profit growth,” Goncharenko notes. “However, restoring investor confidence, improving institutions, and creating a liquid domestic capital market are equally important,” he concludes.

Margarita Mordovina

RBC, October 8, 2025

This article has been translated to English by PSK‑Solutions LLC. The original version in Russian is available here.

This is an unofficial translation provided for informational purposes only. All rights to the original content belong to the original author(s), and no copyright infringement is intended. While we strive for accuracy, slight discrepancies may occur in the translated version.