But few see Russian President Vladimir Putin backing down.

"I do not expect him to blink," said Ian Bremmer, president of the Eurasia Group, a political risk and consulting firm.

Russia began the year as the world's eighth-largest economy, with a gross domestic product of US$2.1 trillion, according to the World Bank. A single rouble is now worth less than two US cents, having lost about 50 per cent of its value against the dollar since January.

This means Russia's GDP has been halved in dollar terms, putting it roughly on par with Mexico and Indonesia as the world's 15th largest economy.

Before financial markets opened on Tuesday, the Bank of Russia increased its key rate to protect the rouble's value. In doing so, the bank hoped investors would find it more financially appealing to keep their money in Russia. However, the rouble fell in trading to close on Tuesday at 80 roubles to the US dollar, compared with 65 on Monday. It recovered later to a rate of 68 to the dollar.

Russian officials have already projected that their economy will shrink nearly 5 per cent next year. That will, by extension, affect its trading partners in Europe and Asia.

Russia imports about US$324 billion in goods annually, primarily from China, Germany, Ukraine, Belarus and Japan. Those imports have grown costlier because of the falling rouble.

One potential global risk came from Russia seeking to retaliate against the sanctions by stepping up cyberattacks against US targets and asserting itself more aggressively in Ukraine and other nearby countries, Bremmer said.

On Tuesday, Russian Foreign Minister Sergei Lavrov argued in a French TV interview that the sanctions were intended to end Putin's regime.

"The aim is to sharpen the choice [Putin] faces," White House spokesman Josh Earnest said of the sanctions. He said Obama was likely to sign the bill authorising the new sanctions this week. The measure cleared Congress late on Saturday.

Unlike during the previous rouble crash in 1998, Russia is unlikely to receive help from the International Monetary Fund and the World Bank, organisations backed by the United States and its European allies. Isolated and alone, Russia might then choose to default on some of its debt.

"Our deepest fear has been - and still is - that putting Mr Putin in a 'nothing-to-lose' situation removes any constraint he might have had against reneging on his foreign debt obligations, which Russian borrowers probably cannot pay off or service now," writes Carl Weinberg, chief economist at High Frequency Economics. Foreign lenders would have to brace for US$670 billion in losses.

This possibility has sparked an investor retreat from Russia. But that pullback has also caused investors to flee other emerging market currencies that are deemed risky. They include Turkey, Brazil, South Africa and Indonesia, noted John Higgins, chief markets economist at Capital Economics.

Higgins said that oil prices were the central factor that would determine "the depth of Russia's problems and the consequences for the global financial markets". Should oil continue to collapse, the financial and geopolitical turbulence in Russia would worsen.

Even before the extraordinary action on the rouble, the central bank had warned that if oil prices stayed where they were today, in the range of US$60 a barrel, the economy would contract sharply. Higher interest rates now further raise the cost of borrowing for Russian businesses, deepening the expected contraction.

"Nothing they do with monetary policy can help. If you have something that is fundamentally wrong, you can't fix it with monetary policy," said Aslund of the Peterson Institute.

For months after Russia moved into Ukraine, it was able to weather international sanctions thanks to its revenues from high oil prices. Now, however, oil prices have been roughly halved in the past six months, giving more bite to US and European sanctions that have sought to isolate Russian energy firms and banks.

Russia's single-resource economy is even more reliant upon oil and gas than the numbers say, according to Indra Overland, a Russia expert at the Norwegian Institute of International Affairs in Oslo.

"Russia is a petro-state," said Overland, adding that falling prices meant job losses throughout the large chain of energy suppliers. "As the oil prices fall, so does Russia."

Analysts generally attribute the plunge in oil prices to rising supplies and slowing demand as Europe and Japan falter and China's growth weakens. But as the price dropped further, fears were intensifying that the decline was pointing to slower growth than many analysts had expected, said David Joy, chief market strategist at Ameriprise.

That could make the situation for Russia even more dire. "Oil hasn't found a bottom yet, so the pain is only going to get worse as the price of oil continues to fall," Joy said.

Ordinary Russians, meanwhile, are emptying out ATM machines and standing in long lines to buy appliances and electronics, anything that might hold its value more than the sinking Russian currency. It's led to a strange, albeit temporary boom for Russian consumption.

"Not seeing bank runs and panic just yet. So far there's actually been a mini-consumption boom, as Russians buy durable goods [and real estate] that hold value better than the rouble," said Alexander Kliment, a Russia expert for political risk consultant Eurasia Group.

But it is easy to see how that could quickly shift as the falling rouble makes imports more expensive. Many Russians are accustomed to the hard times of the Soviet era, and the elites in Russia will now be more beholden to Putin than before as their fate is increasingly in his hands.

"That said, the economic situation will be tough next year. Recession and inflation. Putin's increasingly in a corner, and that's dangerous," said Kliment, who does not expect a retreat from Ukraine. "Ukraine policy is a key part of Putin's political support now. To cave on that would be politically disastrous for him."