The Russian rouble has hit historic lows against the dollar as investors worried about Moscow's response to a new wave of Western sanctions over the Ukraine crisis. As Ciara Lee reports Europe's fragile recovery could be hurt by any retaliatory action.
Monday blues hit the Russian rouble. Sinking to historic lows against the dollar, as investors revealed their concern over the new wave of Western sanctions. Last Friday the U.S. and EU further limited access to foreign capital for some key oil companies and banks. That hurt Russian companies - and some were already reeling from previous sanctions. Vladimir Osakovsky is a Russian economist from Bank of America Merill Lynch. (SOUNDBITE) (Russian) BANK OF AMERICA MERRILL LYNCH CHIEF RUSSIA ECONOMIST, VLADIMIR OSAKOVSKY, SAYING: "The rouble is a hostage of political factors. The sooner our politics get better, the better it will be for investors." Depressed oil prices have compounded the problem, particularly for energy firms like Rosneft, Transneft and Gazprom Neft. President Vladimir Putin described the sanctions as 'a bit strange.' And they could certainly hurt those implementing them, says Rabobank's Jane Foley. (SOUNDBITE) (English) SENIOR CURRENCY STRATEGIST AT RABOBANK, JANE FOLEY, SAYING: "It's very difficult to draw conclusive evidence about how exactly the European econmy will be hit. But one thing that is for sure is that winter is going to be very interesting to see how the energy policy managed although we know that right now oil prices are relatively low and supplies seem to be really quite ample." Russia's energy groups aren't just being cut off from capital markets. They're also unable to access foreign technology - and that will damage long-term production, possibly bringing a halt to the exploration of Russia's huge shale oil-rich Arctic. Russian projects from the Caspian Sea to Iraq and Ghana are under threat. But so too is a landmark drilling programme between the U.S. and Russia. Exxon Mobil has been working with Rosneft in a joint Arctic venture. It's all adding to the pain Russia's economy is feeling. But public support for Putin remains high His seizure of Crimea in March was widely welcomed. And it seems the tougher sanctions are turning Russians against the West not the President.