Russia took a financial hit over its military intervention in neighbouring Ukraine, with its markets and currency plunging.
The Moscow stock market fell over 11 per cent, wiping nearly US$60 billion off the value of Russian companies in a day, and the central bank spent US$10 billion of its reserves to prop up the rouble as investors took fright at escalating tensions with the West over the former Soviet republic.
The Bank Rossii (Bank of Russia) raised its main interest rate to 7 per cent from 5.5 per cent in a clear bid to support the rouble, which hit historic lows against the US dollar and the euro.
"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.
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 per cent. Gazprom's finance chief warned Ukraine that it may raise gas prices from next month, accusing Kiev of a patchy payments record.
The rouble 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 yesterday it lost further value to trade at 51.20 roubles to the euro.
It was a similar story in rouble/dollar trade, with one US dollar worth just over 37 roubles, the lowest value ever for the Russian currency and beating even the financial crisis of 2009.
The rising tension between Russia and the West also affected global markets yesterday. US stocks tumbled in early trade, with the Dow Jones Industrial Average slumping 100.31 points in 30 minutes.
National benchmark indexes retreated in European markets. France's CAC 40 dropped 2.2 per cent, Germany's DAX slipped 2.8 per cent and the U.K.'s FTSE 100 declined 1.4 per cent.
Safe-haven assets were in demand, with gold surging to a four-month peak of US$1,350.37 per ounce.
Additional reporting by Agence France-PresseMore on this: