Increased sanctions against Russia and its credit rating being put on negative watch, announced Thursday, were already making their impact felt Friday morning.
The MICEX, Russia's benchmark stock index, fell over 3 percent after the U.S. added more individuals and Russia's Bank Rossiya to its list of those targeted by sanctions and two Western credit agencies changed their outlook on Russia's credit rating to negative from stable.
(Read more: Ukraine: What next for battered economy?)
Bloomberg contributor | Bloomberg | Getty Images
The sanctions led to Visa and Mastercard halting services to Bank Rossiya, a harbinger of what could result if more banks or other Russian companies are threatened. U.S. President Barack Obama also threatened to target Russia's prized natural resources, even if it had broader economic consequences, which could seriously hinder Russian economic recovery.
"The second round of U.S. sanctions yesterday ripped around Putin's inner circle and were very strong in terms of messaging in terms of indicating that they "know" the financial channels which support the country's elites," Timothy Ash, head of emerging markets research at Standard Bank, said.
(Read more: S&P downgrades Russian outlook)
Fitch and Standard and Poor's assessment of the dangers facing the Russian economy may be dismissed by the Russians as Western propaganda. Russian Deputy Finance Minister Alexei Moiseev said that the S&P move was based on "nothing."
Still, the move could lead to rising cost of repaying its debt for Russia, which would dent an already tentative recovery.