"Since U.S. and [European Union] banks and investors may well be reluctant to lend to Russia under the current circumstances, the economy may slow further and the private sector may require official support," the global ratings agency said affirming Russia's rating was triple-B.
Russian President Vladimir Putin Friday signed a Parliament-passed decree ratifying the treaty on reunification of Ukraine's breakaway Crimea with Russia after Crimean voters overwhelmingly approved a referendum to secede from Ukraine and join Russia.
Fitch's move follows a similar action by Standard & Poor's Ratings Service Thursday, the Wall Street Journal reported. Standard & Poor's cut its outlook for Russia to negative from stable, while affirming its own triple-B rating.
Tougher sanctions imposed by the United States Thursday and the risk of debt-rating downgrades negatively affected Russian stocks, with the sharpest falls felt by companies tied to people listed for new sanctions, the Journal said.
Russia's Micex stock index tumbled by more than 3 percent as trading began Friday, while the RTS Index lost more than 4 percent in early trading. During the trading session, both steadied somewhat.
"The direct impact of sanctions announced so far is minor, but the incorporation of Crimea into the Russian Federation will likely lead the EU and U.S. to extend sanctions further in response," Fitch said. "Furthermore, foreign investors may anticipate further official action and restrict Russian entities' access to external financing."
Fitch could cut its rating on Russia if tougher sanctions are imposed, reserves fall and growth prospects suffer, the Journal said. The firm warned "a steep and prolonged oil price fall that had a material impact on the economy and public finances" also could lead to a rating cut.
Leaders in pro-Russia Crimea and Moscow refused to recognize the legitimacy of the new government in Kiev that came to power after months of bloody protests that eventually led to the ouster of pro-Russia President Viktor Yanukovych. He surfaced in Russia several days after he was chased from office.