Russia’s key indices lost up to 12 percent in Monday trading, while the Russian ruble has reached historic lows against both the dollar and the euro.

On Saturday, Russian President Vladimir Putin asked the  Federation Council to send stabilizing Russian military forces to  Crimea, a peninsula in the Black Sea home to Russia’s Black Sea  Naval base and a predominantly Russian-speaking population. The  proposal was unanimously approved, but has yet to be signed by Putin, and  troops have not yet been deployed into Ukraine.

State-owned banks, which could be the first targets of Western  sanctions, fell sharply on Monday. Sberbank, Russia’s largest  lender, lost 14.91 percent, and ordinary shares of Russia’s  second-largest state-owned bank, VTB, lost 17.52 percent by the  end of Monday trading.

The ruble-based MICEX dropped 10.79 percent on Monday, and the  dollar-based RTS index fell 12.01 percent, the lowest level since  September 2009.

Index trading is suspended if there is a 25 percent change.

“It is possible that investors would stay away from the  markets till this uncertainty goes away,” Ambareesh Baliga,  a managing partner at Edelweiss Financial Services, a  Mumbai-based financial services company, told Bloomberg.

Gazprom, Russia’s largest natural gas producer, part of the MICEX  index, dropped 13.89 percent on Monday over the escalating  tension in Ukraine. Gazprom sends gas through Ukraine to European  markets. In 2006 and 2009 deliveries were disrupted over disputes  with Ukraine, which took a financial toll both on the company and  European customers. Lukoil, Russia’s largest private oil company,  lost 7.43 percent.

Mechel, one of Russia’s leading mining and metals companies, lost  over 26 percent in the opening hours, which caused trading in the  stock to be suspended for 30 minutes.

If a stock’s value fluctuates 15 percent compared to the previous  day’s close in a ten minute time window, trading is suspended for  30 minutes.

A rapid deviation of 20 percent will suspend trading in a  particular stock for 1 hour. Trading for the whole day could be  suspended in an individual stock if a change of 30 percent  occurs.

Much smaller than New York’s $13.4 trillion, or even London’s  $3.6 trillion exchanges, Moscow’s Exchange has about a $1  trillion market capitalization.

Knee-jerk reaction?

The Russian ruble has hit new historical lows, both against the  euro and the dollar, as geopolitical risks in Ukraine heighten,  and the prospect of a stand-off with the West looms.

The US dollar rose rapidly against the ruble after Asian markets  opened, with the greenback standing at 36.50 against the ruble.

Over the weekend, Russia’s biggest bank, Sberbank, shifted its  dollar rate to 38.50 rubles, and many other banks are following  the suit. The state-bank is buying a euro for 53.15.

The euro rose nearly a full unit, passing the 50-ruble benchmark.

“Ruble and equity indices face a knee-jerk hit. An initial  negative knee-jerk reaction is inevitable in the ruble, the  domestic debt market and in equities when the Moscow bourse opens  Monday,” Chris Weafer, senior partner at Moscow-based  consulting firm, Macro Advisory, said in a note Sunday.

Central Bank’s action

Disarray in the market, and a fast weakening currency prompted  the Central Bank of Russia to temporarily increase its benchmark lending rate from 5.5  percent to 7 percent. This is the first time the bank has changed  the rate in 18 months.

Previously the bank had been discussing lowering interest rates,  but decided to hold off in order to protect against inflation.

After the New Year, the Central Bank decided to stop interfering  on behalf of the overvalued Russian ruble, and lifted controls on  the currency, which the institution plans to be free-floating by  2015. The bank hasn’t made any statement on further currency  intervention.