Russia spent a fifth of the entire cost of the Sochi Olympics within a few hours on Monday in a desperate attempt to prop up the collapsing rouble. But investors still sold the currency down to record lows in panic at the prospect of an escalation of the Ukraine conflict.
Russia's central bank in Moscow bought an estimated $10bn (£6bn) of roubles in the market in an attempt to stave off a collapse in its value. Nevertheless, the currency fell to its lowest-ever levels against the euro and the dollar.
It was not just the rouble from which investors fled. The Moscow stock market and Russian government bonds crashed too, with the Micex stock index losing nearly $60bn on paper, or more than 10 per cent.
Russia spent a reputed $51bn on hosting the Winter Games. "Investors held a selling spree of Russian assets," Dmitry Kulakov, a stockbroker at the Olma investment house, said, adding they were "frightened" by the situation around Ukraine.
There was also collateral damage for non-Russian companies in the Moscow-shares rout. BP, one of Britain's biggest companies, saw its shares tumble due to the decline in Russian oil giant Rosneft, of which it owns nearly 20 per cent. The British company's shares fell more than 2 per cent by the close of trading on Monday night.
It was far from alone. Shares across the world fell from their recent record-high levels as investors sought safer havens for fear of escalation of the political crisis.
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Energy and grain prices leapt amid concerns about production shortages. Ukraine is the world's third-biggest corn exporter and Russia is the biggest seller of oil and gas overseas.
More than a third of Europe's oil and gas from Russia is routed through pipelines in Ukraine. Supplies have not been disrupted yet, although Russia has used its gas as a weapon in previous political rows. Gas and oil prices rose sharply, while gold and the yen - traditional safe-haven investments in times of geopolitical turmoil, also rose.
Economists said sustained higher commodities prices could trigger potentially damaging global inflation if the crisis continued.
Edward Meir, an analyst at the global commodities group INTL FCStone, said: "If the situation is not defused, it has the potential to spark wider economic turmoil through higher oil and gas prices, trade sanctions and a general ratcheting-up of global tensions that could endanger the fragile global economic recovery."
However, the threat of sanctions for Russia could be a long-term problem. Most traders were convinced the impact for the rest of the world's stock markets would not last.
"The Ukraine news is troubling, but there are always global risks and short-term fluctuations because of these risks," one fund manager told Bloomberg News.
Russia's central bank not only spent billions propping up its currency, it also moved to protect it by increasing interest rates in the hope that would be enough of a lure to prevent some of the flight of investors. It still had plenty of firepower to buy more roubles, with nearly $500bn in gold and foreign-exchange reserves. That was preventing further slides in the value of the currency, traders said.
In Russia, meanwhile, some high street currency exchange bureaus reported running out of dollars as Russians rushed to exchange their roubles.
Analysts were attempting to calculate the impact of the situation on the Russian economy, given the increasing likelihood of economic sanctions. While the European Union would not be likely to stymie its own economies by putting sanctions on Russian energy, other products could be targeted as well as potential asset freezes on selected individuals and companies.Reuse content