Russia's central bank promised to support financial institutions hit by US sanctions as stocks took a tumble in Moscow today.
In an online statement, the bank promised to "take adequate measures" to support targeted institutions. Russia's state-owned VTB bank, Russia's second-largest, was down 1.2 per cent today.
Other major banks that were left unscathed by sanctions, such as the country's largest, Sperbank, were trading higher.
US officials yesterday said that roughly 30 per cent of Russia's banking sector assets are now constrained by sanctions.
The move comes after Malaysia Airlines Flight 17 was shot down over eastern Ukraine. Western officials accuse pro-Russian separatists of bringing down the plane with a missile supplied by Moscow.
The West also halted future sales to lucrative Russian economic sectors, with the US announcing plans to block future technology sales to the oil industry and Europe approving an arms embargo. The Europeans yesterday also backed sanctions against state-owned banks and the energy sector, though the specific EU targets won't be made public until later in the week.
Western officials insist the new sanctions will damage an already struggling Russian economy. The International Monetary Fund has slashed Russia's growth forecast for this year to nearly zero, down from 1.3 per cent last year, and the US says more than USD 100 billion in capital is expected to flow out of the country.
"Russia's actions in Ukraine and the sanctions that we've already imposed have made a weak Russian economy even weaker," President Barack Obama said yesterday.
It remained uncertain whether the tougher penalties would have any impact on Russia's actions in Ukraine, nor was it clear what further actions the US and Europe were willing to take if the situation remains unchanged. In the nearly two weeks since the Malaysia Airlines plane was felled in eastern Ukraine, Russia appears to have deepened its engagement in the conflict, with the US and allies saying that Russia was building up troops and weaponry along its border with Ukraine.
Europe has a far stronger economic relationship with Russia than the US does, and until this week European Union leaders had been reluctant to impose harsh penalties, in part out of fear of harming their own economies.
EU President Herman Van Rompuy and the president of the European Commission, Jose Manuel Barroso, said the sanctions sent a "strong warning" that Russia's destabilisation of Ukraine could not be tolerated.
