Daniel Yergin at IHS Markit says the situation “could be the worst crisis since the Arab oil embargo and the Iranian revolution in the 1970s”, which caused recessions globally.

But he thinks Russia will be the big loser: “Vladimir Putin in a week has destroyed what he spent 22 years building, an economy that was basically integrated with the global economy. Now what’s happened is Russia is unplugged from the global economy.”

Moscow’s next move could be to block fertiliser. It is pushing exporters to halt sales to the West, which would threaten food supplies globally.

Commodities such as palladium could follow. The metal is key to catalytic converters, meaning a lack of supplies could cause chaos in global car supply chains.

Cyber war

Full-scale cyber attacks have so far not been deployed by Putin in response to sanctions over his war on Ukraine.

Krishna Guha, vice-president of Evercore ISI, says western authorities have been preparing for years in case of a major attack on the financial infrastructure - a potential way to retaliate against the crippling of Russia’s banking system.

He adds: “In the extreme case, you could see a new type of financial stability risk caused by cyber. Financial stability experts have emphasised that while we still need to worry about the type of financial crisis that we had in 2008, it is possible now to imagine new-generation financial crises that are caused by cyber attacks.”

Guha suggests Putin may so far have been deterred by fear of retribution by the US and its allies.

Alternatively, he says, “it may be that Russia’s cyber capabilities, rather like some of their other military capabilities, haven’t been as effective in taking down Ukrainian information networks and government systems” indicating they are already “quite tied up with Ukraine”.

“Vladimir Putin in a week has destroyed what he spent 22 years building, an economy that was basically integrated with the global economy. Now what’s happened is Russia is unplugged from the global economy.”

IHS Markit analyst Daniel Yergin

The Russian state has, however, intensified its control over the media, blocking the BBC and Facebook and placing limits on Twitter. Other tech companies have imposed their own restrictions, such as Apple Pay stopping payment services and Netflix going offline in the country.

Moscow has for years been inspired by China’s “Great Firewall” which allows the state a high level of control over what can be seen online. Ramping up limits on large western media and tech firms simultaneously denies them a market, while enhancing its own propaganda regime.

Financial retaliation

Russia’s financial system has proved to be one of its key vulnerabilities. Even its attempt to build a foreign exchange warchest of more than $US600 billion has been undermined by sanctions effectively freezing most of that stockpile.

In retaliation, Putin has already forced businesses to sell most of their own hard currency and prevented foreigners from taking cash out of the country in an effort to stop funds from fleeing and prop up the rouble.

It could, however, fight back with more dramatic measures.

One option is to fully default on debt repayments to foreigners, keeping cash in the country and hurting investors from abroad.

In the long-term this harms Russia, as investors will be less likely to trust it with their cash in future, but in the short-term its treasury benefits from savings.

Another option is the outright seizure of assets.

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Michelle Linderman at law firm Crowell & Moring draws comparisons with countries such as Venezuela.

“What often happens is, if there are foreign entities in the country with expensive hardware involved in big projects, you kick the foreigners out and keep the equipment,” she says.

What might be more difficult is operating those facilities productively - factories are already closing in Russia for want of crucial imported components which cannot be summoned up by expropriating machinery.

Telegraph, London

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