At the same time, the rating agency affirmed Russia's BBB foreign currency rating.

"The outlook revision reflects our view of the material and unanticipated economic and financial consequences that EU and U.S. sanctions could have on Russia's creditworthiness following Russia's incorporation of Crimea, which the international community currently considers legally to be a part of Ukraine," S&P said in a statement.

U.S. President Barack Obama announced sanctions on Thursday against prominent Russians including close allies of President Vladimir Putin as Moscow raced to complete its annexation of Crimea and built up its forces in the region.

Russian forces took control of the region in late February following the toppling of Moscow-backed Ukrainian President Viktor Yanukovich by protests provoked by his decision to spurn a trade deal with the EU and seek closer ties with Moscow. People in Crimea voted overwhelmingly in a referendum last Sunday to join Russia.

"We expect that the EU and U.S. will impose further sanctions," S&P noted in its statement. Those sanctions, in turn, could erode Russia's growth prospects.

The deteriorating geopolitical situation has already affected Russia's economy, S&P said.

"The Central Bank of the Russian Federation appears to have abandoned its policy of increased currency flexibility and limited intervention in the foreign-exchange market," the rating agency said.