President Barack Obama imposed the toughest US sanctions yet on Russia, striking at the heart of Vladimir Putin's powerbase by targeting companies closest to him over what Washington says is Moscow's failure to curb violence in Ukraine.
By imposing penalties on Russia's largest oil producer Rosneft, its second largest gas producer Novatek and its third largest bank Gazprombank, Washington targeted Putin's allies, many of whom have become wealthy during his tenure.
The sanctions, which in effect close medium- and long-term dollar funding, were also put on Vnesheconombank, VEB, a state-owned bank that acts as payment agent for the government, and eight arms firms, including the producer of the Kalashnikov assault rifle.
The sanctions did not freeze those four companies' assets, or stop US firms from doing business with them and several were quick to say it was business as usual. But Russia's rouble-traded stock market and the rouble tumbled on opening.
Rosneft and Novatek were heavily hit, with both down more than 5%. The MICEX index was off more than 3%.
In his harshest words yet about future ties with Washington, Putin said the sanctions would damage US energy companies and bring relations to a "dead end." A Foreign Ministry official said Moscow would hit back in a way that would be "painful" for Washington.
The chief executive of Russia's VTB bank warned of potentially devastating consequences for the global financial system from sanctions which he called illegal, echoing the sentiment of several Russian business leaders.
"Of course, these sanctions are inappropriate and of course they do not correspond to the spirit or the legal standards of existing international relations, in particular in the field of finance and banking," Andrei Kostin, whose bank is Russia's second largest, was quoted as saying by Itar-Tass news agency.
"I believe that if we do not take measures to stop such unilateral actions, we could see devastating consequences for the global financial system."
