Members of pro-Vladimir Putin group at rally in Moscow Russian stock markets Monday crashed almost 10 percent and the ruble plunged to historic lows in value against the dollar and euro, as alarm grew over the potentially disastrous economic consequences of military intervention in Ukraine.
Russia's central bank hiked its main interest rate in an emergency move to stem capital flight and the losses for the ruble, amid what risks becoming at least Russia's worst economic crisis since 2009.
President Vladimir Putin on Saturday had won approval from Russia's upper house for the sending of troops to Ukraine due to the standoff in Crimea following the ousting of pro-Moscow president Viktor Yanukovych.
Economists warned the move risks creating a litany of further trouble for the Russian economy, which is already battling chronically slow growth.
Military intervention will drain further resources from a Russian budget already stretched by costs like the Sochi Olympics, alarm already nervous investors, limit Russia's economic ties with the West and force Russian companies into huge write-offs in Ukraine.
"Sochi was already expensive. Military adventures and strained relations with the West can be much more expensive than that," said economist Holger Schmieding at Berenberg Bank in London.
"Russia cannot afford that in the long run," he added.
- Black Monday -
The MICEX stock market in Moscow was trading down 8.35 percent while the RTS bourse had fallen by 9.70 percent at around 0945 GMT.
It was a Black Monday of carnage on the stock markets for some Russian blue chip shares.
Stocks in Russian gas giant Gazprom -- which has a huge contract to export gas to Ukraine as well as banking interests in the country -- fell over 10 percent. Russia's biggest lender Sberbank was down 13.25 percent
The ruble has already been under major pressure in recent weeks due to investor nerves about emerging markets and Russia's flimsy medium term growth prospects.
But the Ukraine crisis Monday pushed it to levels not seen even in Russia's 2009 financial crisis that followed the collapse of Lehman Brothers and the Georgia war.
The ruble plunged in value to trade at more than 50.2 rubles to the euro. On Friday it stood at 49.578.  
It was a similar story with ruble/dollar trade, with one dollar worth 36.45 rubles. At close of play on Friday it was 36.283.
The Bank Rossii (Bank of Russia) raised its main interest rate to 7.0 percent from 5.50 percent in a clear bid to support the ruble and stem an already alarming capital flight amid the tensions between Russia and Ukraine.
"The decision is aimed at averting the appearance of risks for inflation and financial stability linked to the increased volatility on financial markets," it said in a statement, adding the hike would take effect from 0700 GMT Monday.
Deputy Economy Minister Andrei Klepach admitted the decision was less linked to inflation than the "pressure on the ruble and the hysterical situation surrounding it".
The decision "is a clear attempt to stem outflows of capital from financial markets following the escalation of the crisis in Ukraine," said Neil Shearing, chief emerging markets economist at Capital Economics.
He warned that the worst thing now would be for the government to respond "with a wave of populist government spending".
- 'Worse than after 2008 war' -
The economic consequences of intervention in Ukraine risk becoming a huge headache for Putin and have parallels with the 2008 war with Georgia over the region of South Ossetia, which fed into Russia's 2009 financial crisis.
However the magnitude of the Ukraine situation means a Russian economic crisis in 2014 could be even more serious.
"Unlike the five-day war in South Ossetia, we are concerned that the tensions in Ukraine will very likely last considerably longer, having a prolonged negative effect on Russia’s economic environment," economist Natalya Orlova at Alfa Bank said in a note to clients.
She said that not even the current depreciation of the ruble would support Russian GDP while several Russian banks were hugely exposed to Ukraine.
On Sunday, US Secretary of State John Kerry warned that Putin "is not going to have a Sochi G8, he may not even remain in the G8 if this continues," he said on NBC's "Meet the Press".
"He may find himself with asset freezes on Russian business, American business may pull back, there may be a further tumble of the ruble," added Kerry.
Before 2009, Russia had enjoyed stellar average annual growth rates of seven percent under Putin's rule. But with growth of just 1.3 percent in 2013, economists now warn it risks being trapped in a cycle of low growth.
Source: AFP