Russian stocks tumbled today as another credit rating agency put the country on notice of a possible downgrade and Visa and MasterCard stopped serving two Russian banks, a day after the US ordered economic sanctions against two dozen people from President Vladimir Putin's entourage.
Fears over Russia's economic outlook have ratcheted up this week after Russian President Vladimir Putin signed the treaty to annex Crimea following Sunday's hastily called referendum which overwhelmingly supported that move. The West considers the vote illegitimate.
President Barack Obama yesterday ordered economic sanctions against nearly two dozen members of Putin's inner circle and a major Russian bank that provides them support.
Putin's chief of staff and four influential businessmen who are believed to be Putin's lifelong friends were among the 20 individuals sanctioned
The MICEX benchmark was down nearly 3 per cent two hours into Friday trading with the companies co-owned by the Russians sanctioned by the White House leading the decline.
The Russian stock market has lost than more 10 percent this month.
As Russian stocks were taking a pounding, two Russian banks including Bank Rossiya, the Russian lender which was put on the Treasury's sanctions list, said Visa and MasterCard stopped providing services to them.
US officials described Russia's 15th largest bank with USD 12 billion in assets as a "personal bank for senior officials of the Russian Federation."
And clients of another Russian lender, SMP, woke up today to discover that they cannot use their cards. In a statement, it said Visa and MasterCard stopped providing their services to them "without prior notification." SMP's co-owners, Arkady and Boris Rotenberg, billionaire brothers and childhood friends of Putin, were hit by the US sanctions yesterday.
The bank, which is in Russia's top 40 with USD 5 billion in assets, said it had no assets in the United States and described Visa and MasterCard's actions as "illegitimate" because the bank, unlike its owners, was not covered by the sanctions.
Though customers in the two banks won't be able to use cards backed by Visa and MasterCard to buy products in shops or online or even withdraw cash from ATMs, the clients can get cash directly from the banks.
