Ukraine's announcement that it was halting preparations to sign the Association Agreement with the European Union threatens to leave in limbo a process that, if fully implemented, would strengthen Ukraine's credit profile, Fitch Ratings has said.

"But the retreat may also reduce the more immediate risk of Russian economic retaliation, which has already affected Ukraine's exports in 2013," Fitch said.

Fitch noted that it downgraded Ukraine to 'B-' from 'B' this month. This reflected the sovereign's fragile external financing position and constraints on its ability to borrow in foreign currency to refinance heavy external debt repayments in 2014-2015, in the absence of an IMF agreement.

"These remain the key rating drivers, and the risks they present are reflected in the continuing Negative Outlook on the rating," reads the statement.