Western sanctions sent Russian shares plunging in early Moscow trading as credit rating agency Fitch warned over the fallout of international isolation.
As the US and European Union stepped up moves against leading Russian and Ukrainian officials with travel bans and asset freezes following the Crimea crisis, the potential impact of sanctions prompted credit agency Fitch to cut its outlook on Russia from stable to negative.
Fitch's move - following similar warnings from rival S&P - raises the threat of Russia's debt being cut to junk status as relations with the West hit a nadir not seen since the Cold War. The cost of insuring against a Russian debt default spiked higher.
The agency said banks would be more reluctant to lend to Russian companies, while the economy faces a heightened risk of recession as interest rates are hiked to defend the rouble.
It warned: "The direct impact of sanctions announced so far is minor, but the incorporation of Crimea will likely lead the EU and US to extend sanctions further in response. Furthermore, foreign investors may anticipate further official action and restrict Russian entities' access to external financing.
"Risk premiums have already risen and syndicated loans to a number of large corporates are reported to be on hold. In a worst-case scenario, the US may prevent foreign financial institutions from doing business with Russian banks and corporates."
Russia's corporates and banks have to rollover around $100 billion (£60.6 billion) in financing by the end of the year, which could have to be met through exchange reserves.
Russian shares took another pounding today as Moscow's Micex index sank 3 per cent, taking losses so far since the crisis erupted to more than 10 per cent.
President Obama has ordered economic sanctions against nearly two dozen members of Russian President Vladimir Putin's inner circle and a major Russian bank - Rossiya in St Petersburg - which provides support. Visa and Mastercard have stopped providing payment transaction services for the bank.
Obama is considering even heavier sanctions against entire sectors of the Russian economy including financial services, oil and gas, metals and mining if Putin encroaches further into the Ukraine.
Russia's top non-state natural gas producer, Novatek, was among the biggest casualties today as shares fell 12 per cent. Shares in Sberbank - Russia's largest bank - fell 2.9% while shares in VTB slid more than 4 per cent. Gas giant Gazprom, oil company Lukoil and steel company NLMK all fell more than 2 per cent .Reuse content