Russian stock market fell sharply on Friday as investors weighed the impact of western sanctions over Ukraine.

The MICEX index, which is priced in roubles fell as much as 3% and the RTS, which is priced in dollars fell 3.6%

Shares slumped after President Barack Obama said sanctions might be extended to key parts of the Russian economy if Russia took further action in Ukraine.

Russia’s mining, defense and natural resources sectors could all be targets.

Stocks recovered some ground during the day after President Vladimir Putin moved to restore calm following the introduction of asset freezes and visa bans by the US against high ranking Russian officials.

The MICEX closed down 1% and the RTS index was down 1.45% at the end of the day.

Russia’s financial services industry found itself under the most pressure.

Visa and Mastercard said earlier on Friday they had stopped providing services to two Russian banks, Rossiya and SMP Bank.

Rossiya, described by the US as Russia’s 15th largest bank, has assets of $12 billion. It said card payment services for its clients had been stopped without notification.

US officials said Bank Rossiya, which is linked to a number of Russian businessmen, had been sanctioned, and would be “frozen out” from the dollar.

Russian stock market fell sharply as investors weighed the impact of western sanctions over Ukraine

They described Rossiya as a “personal bank for senior officials of the Russian Federation”.

Visa and Mastercard confirmed they had stopped providing services to SMP Bank without providing notification.

In a statement SMP, which is Russia’s 39th biggest bank with $5 billion in assets, called Visa and Mastercard’s actions “illegitimate” because its owners, rather than the bank itself, were the subject of sanctions.

The bank’s co-owners, billionaire brothers Arkady and Boris Rotenberg, are childhood friends of Vladimir Putin and were hit with sanctions on Thursday.

Vladimir Putin said Bank Rossiya was “just an average bank” which had “nothing to do” with events in Crimea.

He added he did not hold an account with the bank, but promised to open one “first thing on Monday” and asked for his salary to be transferred there.

Vladimir Putin also ordered Russia’s central bank to “take the bank’s clients under protection and provide all possible assistance to them.”

Russia’s central bank said the blacklisting of Rossiya and its transactions by the US did “not have a serious bearing on the lender’s financial stability”.

Although only banks with connections to high ranking Russian officials have been targeted Russian bank shares were broadly lower.

Shares in Sberbank, Russia’s largest bank, closed 1.17% lower – having fallen 2.9% earlier on Friday, while shares in VTB Bank were 2.61% lower after falling 4.3% earlier in the day.

Other sectors were also hit. Gas giant Gazprom was down 0.9%, oil firm Lukoil ended the day 1.36% higher. Russian steel company NLMK closed 1.94% lower.

Shares in gas producer Novatek closed down 9.63%. The company is part owned by Gennady Timchenko, a shareholder in Bank Rossiya and one of the wealthy Russian businessmen targeted by Western sanctions.

Ratings agencies S&P and Fitch warned they were changing their outlook for the Russian economy to “negative” from “stable” – the first stage before a possible downgrade in the country’s credit rating – because of the potential impact of sanctions.

President Vladimir Putin’s spokesman Dmitry Peskov criticised the move, suggesting it was not an objective decision and that somebody “ordered” it.

Russia’s credit rating is currently BBB.

Meanwhile the rouble was stable on Friday having previously fallen sharply on Thursday evening in response to the announcement of further US sanctions.

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