Russia investors take fright as Vladimir Putin completes Crimea annexation

Mar 22 2014, 10:42 IST
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The financial noose began tightening with Visa and MasterCard stopping processing payments for a Russian bank owned by two brothers on the U.S. blacklist The financial noose began tightening with Visa and MasterCard stopping processing payments for a Russian bank owned by two brothers on the U.S. blacklist
SummaryCrimea: EU signs deal with Ukraine, pledges financial help

towards an energy union," said Van Rompuy.

German Chancellor Angela Merkel raised the possibility that U.S. shale gas could eventually be an option for European countries seeking to diversify. Obama is expected to address the issue at a summit with EU leaders next Wednesday.

Foreign banks and companies now fear the secondary ripple effects of the sanctions. In a worst-case scenario for them, Washington would stop banks doing business with Russian clients, similar to the sanctions that were imposed on Iran.

"What has been announced so far is really nothing. It's purely cosmetic," said a French banker based in Moscow, adding that the biggest risk was to transfers in U.S. dollars, crucial for the energy export-dependent Russian economy.

Obama said on Thursday that Washington was also considering sanctions against economic sectors including financial services, oil and gas, metals and mining and the defence industry, if Russia made military moves into eastern and southern Ukraine.

In Crimea itself, Ukrainian troops who have been surrounded by Russian forces continued to leave their bases, powerless to halt Moscow's takeover of the peninsula.

"The situation in Ukraine remains unstable and menacing," said German Foreign Minister Frank-Walter Steinmeier, urging the OSCE observers to take up their work as quickly as possible.

EU SUPPORT FOR KIEV

European governments also took individual action against Russia. Germany suspended approval of all defence-related exports to Russia, ordering contractor Rheinmetall to halt delivery of combat simulation gear, while France called off military cooperation with Moscow.

In Brussels, the 28 EU leaders underlined their support for Ukraine's new leadership, signing a political agreement with interim Prime Minister Arseniy Yatseniuk.

They also promised financial aid for the government - rejected as illegitimate by Moscow - as soon as Kiev reaches a deal with the International Monetary Fund.

The IMF is to report next Tuesday on advanced talks with Ukraine on a loan programme that would be linked to far-reaching reforms of the shattered economy.

Three months of protests were set off by Yanukovich's refusal to sign an association agreement with the EU, the political part of which was signed on Friday.

Russia's MICEX stock index fell about 3 percent when trade opened, although it recovered some of the losses later. Promsvyazbank analyst Oleg Shagov said Obama had "opened a Pandora's box full of sanctions", with future sanctions to be "directed against whole sectors of the Russian economy".

Negative market sentiment was reinforced by warnings from credit ratings agencies Fitch and S&P that they were changing their

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