Demonstrators hold a large flag, a combination of a Ukrainian, Crimean, and Tatar flags, in Independence Square in... Read More 
 
 Demonstrators hold a large flag, a combination of a Ukrainian, Crimean, and Tatar flags, in Independence Square in Kiev, on March 23, 2014. Close 
 
 Russian President Vladimir Putin sent his popularity surging to a five-year high by making Crimea a part of Russia... Read More 
 
 Russian President Vladimir Putin sent his popularity surging to a five-year high by making Crimea a part of Russia again after 60 years and says he won’t be swayed by foreign retaliation. Close 
 
 An employee assists a visitor at the reception in the headquarters of the Micex-RTS Moscow Exchange, Russia's... Read More 
 
 An employee assists a visitor at the reception in the headquarters of the Micex-RTS Moscow Exchange, Russia's benchmark stock index, in Moscow. Russia’s Micex stock index has plunged 13.1 percent this year compared with a 5.8 percent decline for the MSCI Emerging Markets Index. Close 
 
 An oil storage tank at the custody transfer facility in the Salym Petroleum Development oil fields near the Bazhenov... Read More 
 
 An oil storage tank at the custody transfer facility in the Salym Petroleum Development oil fields near the Bazhenov shale formation in Salym, Russia, on Feb. 5, 2014. Close 
 
 An oil storage tank at the custody transfer facility in the Salym Petroleum Development oil fields near the Bazhenov shale formation in Salym, Russia, on Feb. 5, 2014. 
 
 Sanctions imposed by the U.S. and the European Union are pushing Russia toward a recession as the intensity of their economic penalties increases after the annexation of Crimea earlier this month. 
 
 Banks including state-run VTB Capital say the world’s ninth-biggest economy will shrink for at least two quarters as penalties for annexing Crimea rattle markets, curb investment and raise the cost of borrowing. Sanctions that have so far focused on individuals via visa bans and asset freezes may be expanded to target specific areas of the economy. 
 
 President Vladimir Putin sent his popularity surging to a five-year high by making Crimea a part of Russia again after 60 years and says he won’t be swayed by foreign retaliation. Even so, the costs of the decision are starting to unfold, with Russian stocks this year’s worst performers and the economy set to suffer more than the West, said Mircea Geoana, Romania’s government representative for diplomacy and economic projects. 
 
 It's Personal: The Individuals Targeted by U.S. Sanctions 
 
 “We’re witnessing the start of a new geopolitical and economic Cold War and I think it will take at least two to three years to establish some sort of equilibrium,” he said. “The ones who’ll pay the bill for this aggression, no matter how popular and patriotic it looks, will be the Russian people because there’s a huge difference between the economic force of the EU and the U.S. and that of Russia.” 
 
 Stocks, Ruble 
 
 Russia’s Micex stock index has plunged 13.7 percent this year compared with a 5 percent decline for the MSCI Emerging Markets Index. It was down 0.7 percent at 6:50 p.m. in Moscow. 
 
 The ruble is the second-worst performer against the dollar behind Argentina among 24 developing-market currencies tracked by Bloomberg, weakening 9 percent. It rose 0.4 percent today. 
 
 Full Coverage of the Crisis in Ukraine: 
 
 Investors pulled out $5.5 billion from Russian equities and bonds this year through March 20, already approaching the total outflow of $6.1 billion for the whole 2013, according to data compiled by EPFR Global, a Cambridge, Massachusetts-based firm tracking fund flows. 
 
 After the U.S. expanded sanctions March 20 to include businessmen linked to Putin, such as billionaires Gennady Timchenko and Arkady Rotenberg, Standard & Poor’s and Fitch Ratings cut their outlook on Russia’s credit grade to negative from stable, suggesting a downgrade is most likely next. 
 
 The two companies, which said Western banks are becoming reluctant to lend to Russia, rate the world’s biggest energy exporter at BBB, the second-lowest investment grade and on par with Brazil and South Africa. 
 
 Crisis Signs 
 
 A Snapshot of Ukraine's Past and Future 
 
 Even before the standoff with the West, the worst since the Cold War, Russia’s economy was facing the weakest growth since a 2009 recession as consumer demand failed to make up for sagging investment. The current situation in the economy “bears clear signs of a crisis,” Deputy Economy Minister Sergei Belyakov said March 17 after the first European Union and U.S. sanctions. 
 
 Russia will probably dip into a recession in the second and third quarters of this year as “domestic demand is set to halt on the uncertainty shock and tighter financial conditions,” according to Moscow-based VTB. 
 
 Russia’s central bank unexpectedly raised its benchmark interest rate by 150 basis points after the armed takeover of Crimea triggered a rout in the ruble. Putin completed his annexation of the Black Sea peninsula March 21. 
 
 ‘Mosquito Bite’ 
 
 Russia may shun foreign debt markets in 2014 because of higher borrowing costs, according to Finance Minister Anton Siluanov. He expressed frustration at disruptions to MasterCard Inc. and Visa services for cards issued by banks on or linked to persons on the U.S. sanctions list. 
 
 “Some people say these sanctions won’t affect Russia’s financial system but they already are,” he said March 21. 
 
 Even so, the measures may not have much effect on the individuals targeted or on Putin’s thinking on Ukraine, whose government accuses the Russian leader of stirring up unrest elsewhere and planning an invasion of the country’s east. 
 
 The sanctions represent “a mosquito bite” because most officials on the list aren’t permitted to travel abroad privately and have most of their business in Russia, said Konstantin Kostin, a Kremlin adviser who heads the Civil Society Development Fund. Government members featured in a new EU list March 21 include Putin aides Sergei Glazyev and Vladislav Surkov. 
 
 Putin, meanwhile, would require stiffer penalties to budge, according to Ariel Cohen, senior fellow at the Republican-leaning Heritage Foundation in Washington. 
 
 No Retreat 
 
 “You’re dealing with an individual who won’t be easily intimidated,” he said March 21 by phone from Washington. “The West is escalating sanctions but Russia isn’t going to back off on Crimea and Ukraine that easily. It will take more than pinpointed individual sanctions to start rolling this back.” 
 
 Russia imposed retaliatory sanctions on 13 Canadians today, banning them from entering the country. In a possible escalation, U.S. President Barack Obama has authorized potential future penalties on Russian industries, including financial services, energy, metals and mining, defense and engineering. 
 
 The EU, which relies on Russia for a third of its energy imports, has struggled to find ways of punishing Putin because trade steps risk damaging Europe’s economy. Banking curbs would hurt Britain, an arms embargo would bar France from selling Mistral-class helicopter carriers to the Kremlin and cutbacks in gas purchases would harm a swathe of EU nations. 
 
 Threat Effect 
 
 The declines in Russian stocks, weakness in the ruble and the risk of downgrades to the country’s credit rating show threats of future sanctions can erode business confidence and hurt the economy, according to Fredrik Erixon, director of the European Centre for International Political Economy. 
 
 “Investors and ratings agencies are basing their views not on what’s happened with sanctions so far but on what may happen,” he said March 21 by phone from Brussels. 
 
 The benchmark Micex stock index has lost 13 percent and the ruble is down 8.4 percent against the dollar since Nov. 21, the start of protests that ousted Kremlin-backed former President Viktor Yanukovych and triggered the crisis. 
 
 Capital outflows from Russia may reach $70 billion in the first quarter, more than the $63 billion recorded in the whole of 2013, London-based Capital Economics Ltd. said last week in a report. 
 
 Outflows of $100 billion this year would risk zero growth, Herman Gref, chief executive officer of Russia’s biggest lender, OAO Sberbank, said today. 
 
 To contact the reporters on this story: Andra Timu in Bucharest at atimu@bloomberg.net; Henry Meyer in Moscow at hmeyer4@bloomberg.net; Olga Tanas in Moscow at otanas@bloomberg.net 
 
 To contact the editors responsible for this story: Balazs Penz at bpenz@bloomberg.net Andrew Langley ||||| Visa and MasterCard suspended services for Bank Rossiya, whose main branch in St. Petersburg is shown here. (Photo: Elena Ignatyeva, AP) 
 
 MOSCOW — Sanctions against Russian President Vladimir Putin's inner circle won't affect him, experts here say, but average Russians believe it is they who will feel the brunt of the economic penalties. 
 
 The United States and Europe have issued travel bans and asset freezes against 20 Russian officials and businessmen to deter the Kremlin from further aggression against Ukraine, where Russian troops have effectively taken over the province of Crimea. 
 
 "The position of officialdom and business is that these sanctions aren't hitting Russia very hard, while harsher economic sanctions are problematic for Western countries themselves," said Dmitry Danilov, head of the European security department at the Institute of Europe of the Russian Academy of Sciences. 
 
 The effects of the sanctions were felt in Moscow on Friday, where several banks said that Visa and MasterCard stopped providing services for payment transactions. 
 
 Visa and MasterCard suspended services on Friday for Bank Rossiya, whose shareholder, Yuri Kovalchuk, is widely reputed to be close to Putin. Both Kovalchuk and Bank Rossiya fell under the sanctions imposed Thursday. 
 
 The bank, ranked the 17th largest in Russia, provides services for 24,000 corporate clients and 470,000 private clients. Russia's SMP Bank, whose shareholders, Arkady and Boris Rotenberg, had been sanctioned, also said that Visa and MasterCard had suspended services for the bank's card holders. 
 
 The credit card companies resumed working with SMP on Saturday, Interfax quoted a bank representative as saying, because the sanctions had been imposed on shareholders but not on the bank itself. 
 
 However, credit card services at Bank Rossiya continued to be blocked. Ordinary Russians feared the fallout from the sanctions would trickle down to them. 
 
 "These sanctions are taking us back to central planning," said entrepreneur Sonya Sokolova, who heads the Zvuki.ru online music portal. "No one can punish Russia as much as it punishes itself." 
 
 Others who have grown accustomed to taking advantage of Western payment transaction services such as Visa and MasterCard fear that the problems could spread to other banks, with entrepreneurs asking who could be next after Kovalchuk and the Rotenberg brothers. 
 
 The problem will affect mostly regular workers, says Sokolova. Employees are increasingly asking that their salaries be transferred in cash, local entrepreneurs told Moscow news media. 
 
 Russia's RTS index fell 4.5% on Friday on news of the new round of Washington sanctions. But what Russians feared more than the sanctions themselves were the Russian government's response to the penalties. 
 
 A bill was introduced into Russia's parliament on Friday to ban transaction services that were based outside of Russia. While the draft was part of a bid to develop Russia's own transaction services, in effect it would mean that credit card companies such as Visa and MasterCard would not service clients in Russia. 
 
 "The fact that our banks use infrastructure that they cannot control carries a real threat for national security and makes it possible for Russian banks to be cut off from international payment services, in the manner which we have seen today," ITAR-TASS quoted lawmaker Vladislav Reznik, who introduced the bill, as saying on Friday. 
 
 "There is talk of creating a national payment transaction system, and what that means is that no one's deposits will be safe," said Sokolova, the entrepreneur. "Isolation will increase." 
 
 "From the standpoint of the average population, they will blame the West for this, not Putin," Sokolova said, noting that polls indicate Putin's popularity has skyrocketed since Russia intervened in Ukraine earlier this month. 
 
 Danilov said the current sanctions would not be very effective. 
 
 "There is no consensus on sanction within the European Union," which has a trade turnover of nearly $400 billion with Russia that many EU countries would not want to jeopardize. 
 
 "Given Russia's power structure, it's clear that business is oriented toward politics and they would have to adapt [to new political realities] in any case," Danilov said. "Business and officialdom are more concerned about the situation in Ukraine and their trade ties there than they are about the sanctions." 
 
 Putin laughed off the sanctions on Friday, joking that he would have to "stay away" from the 20 sanctioned officials. He warned that Russia can sanction, too, and has issued travel bans to Moscow against Western officials. He also pledged to open an account at Bank Rossiya out of solidarity. 
 
 Pro-Kremlin expert and adviser Sergei Markov said that average Russians would not really be affected by the sanctions. 
 
 "In fact, they will be enthusiastic about the sanctions, because they help solve one of Russia's key problem, that the elite is seen as stealing Russia's resources and taking them abroad," Markov said. 
 
 "These sanctions lower the dependence of Russia's business elite on the West. Washington's sanctions go in line with President Putin's policies of de-offshorization." ||||| Ukrainian tanks are transported from their base in Perevalne, outside Simferopol, Crimea, March 26, 2014. 
 
 Ukrainian soldiers transport their tanks from their base in Perevalnoe, outside Simferopol, Crimea, March 26, 2014. 
 
 Russian police cars drive and Ukrainian soldiers walk behind Ukrainian tanks at Perevalnoe, outside Simferopol, Crimea, March 26, 2014. 
 
 Crimean retirees line up to get their pensions in Russian rubles inside a post office in Simferopol, Crimea, March 25, 2014. 
 
 Ukrainian marines prepare to leave their base in Feodosia, Crimea, March 25, 2014. 
 
 Russian sailors stand on board the ship Aleksandrovets at the port of Sevastopol, Crimea, March 25, 2014. 
 
 Ukrainian sailors leave the Konstantin Olshansky navy ship in the bay of Donuzlav, Crimea, March 24, 2014. 
 
 People line up to apply for Russian passports in Sevastopol, Crimea, March 24, 2014. 
 
 A man carries a placard with currency rates at an exchange office in Sevastopol, Crimea, March 24, 2014. ◀ ▶ < ▶ || > 1/9 ... ⇱ Disable Captions Enable Captions 
 
 Russian bank SMP showed the impact of U.S. punitive measures over Ukraine on Monday, saying around nine billion rubles [$248 million] had been withdrawn by depositors since Washington imposed sanctions against two of its shareholders last week.Washington imposed sanctions on Thursday against 20 Russians close to President Vladimir Putin over Moscow's involvement in the Ukraine crisis, including Boris Rotenberg and his older brother Arkady, the co-owners of SMP Bank.SMP CEO Dmitry Kalantyrsky told a news conference that an estimated four billion rubles had been withdrawn by individuals and five billion by organizations.On Friday, SMP said Visa and MasterCard had stopped providing services for payment transactions for its clients. On Sunday service had resumed, it said.Kalantyrsky said the stoppage of services had been an over-zealous reaction because sanctions were imposed on the shareholders, not the bank.“[The shareholders] expressed their willingness, if necessary, to support the bank with money,” Kalantyrsky said, but stressed the bank has enough liquidity.St. Petersburg-based Bank Rossiya, which was sanctioned alongside its chairman and largest shareholder Yuri Kovalchuk, said separately in a statement it had asked its clients to refrain from making foreign currency payments to accounts at the bank due to the U.S. sanctions.Kovalchuk said in a television interview on Sunday the sanctions had backfired by helping him win new clients among patriotic Russians. Russian President Vladimir Putin said last week that he would open an account at the bank. ||||| A detained billionaire who made a fortune as a middleman in Russia’s murky gas trade with Ukraine may hold the key for U.S. lawmakers seeking harsher sanctions against President Vladimir Putin’s inner circle. 
 
 Ukrainian Dmitry Firtash, arrested in Vienna this month on an American warrant for bribery and other charges, may hand over a treasure trove of information about deals involving Russian state gas exporter OAO Gazprom (GAZP) that the U.S. would consider corrupt, said Mikhail Korchemkin, a former analyst for the Soviet Union’s Gas Ministry in Moscow and founder of Malvern, Pennsylvania-based East European Gas Analysis. 
 
 After Putin seized Ukraine’s southern Crimea region, a U.S. Senate panel approved a bill on emergency funding for the country that would widen the scope of sanctions to include any Russian involved in “significant” corruption. 
 
 Full Coverage of the Crisis in Ukraine: 
 
 “This law would enable the U.S. to go after any member of Putin’s entourage,” Masha Lipman, an analyst at the Carnegie Moscow Center, said by phone. “The point is to deepen the fractures within the Russian elite. The idea is to weaken Putin so he can be contained.” 
 
 President Barack Obama last week expanded financial sanctions to 20 more Russian officials, billionaires and a bank, including brothers Arkady and Boris Rotenberg, who have joint investments with Firtash in Ukraine and Russia. The Rotenbergs’ companies received $7 billion of contracts for the Sochi Winter Olympics and are major suppliers to Gazprom. 
 
 Photographer: Efrem Lukatsky/ Bloomberg Dmitry Firtash, Ukrainian billionaire, speaks during an interview in his office in Kiev in a Jan. 31, 2009 file photo. Close Dmitry Firtash, Ukrainian billionaire, speaks during an interview in his office in Kiev... Read More Close Open Photographer: Efrem Lukatsky/ Bloomberg Dmitry Firtash, Ukrainian billionaire, speaks during an interview in his office in Kiev in a Jan. 31, 2009 file photo. 
 
 Most Wanted 
 
 Firtash, 48, built his fortune as a broker of Russia’s gas sales to Ukraine, one of Gazprom’s biggest export markets. He and a partner owned half of RosUkrEnergo, which was founded in 2004 and emerged as Ukraine’s sole gas importer in 2006 to 2009, between price disputes with Russia that led to supply halts and shortages across Europe. 
 
 Gazprom oversaw the other half of RosUkrEnergo, which Ukraine’s security service in 2005 said may be indirectly controlled by Semion Mogilevich, an organized crime suspect on the U.S. Federal Bureau of Investigation’s most-wanted list. Firtash has repeatedly denied any link between Mogilevich and RosUkrEnergo. A lawyer for Mogilevich, who lives in Moscow, said his client has never been in business with Firtash. 
 
 Read About Other Individuals Targeted by U.S. Sanctions 
 
 Still, the former U.S. ambassador in Kiev, William Taylor, said Firtash himself told him that he needed Mogilevich’s permission to get into the lucrative gas business with Gazprom, according to a secret cable to the Central Intelligence Agency that was published by Wikileaks and dated Dec. 10, 2008. 
 
 ‘Personal Interests’ 
 
 “Firtash may know whether Ukrainian officials and managers of Gazprom and Gazprombank had personal economic interests in these transactions,” former Gazprom Deputy Chairman Alexander Ryazanov said in an interview in Moscow. 
 
 Gazprom’s spokesman, Sergei Kupriyanov, said the company sees no negative consequences from the possible extradition of Firtash to the U.S. 
 
 Graphic: Mapping the Conflict in Ukraine 
 
 For years, Gazprom sold gas to Ukraine at lower than western European rates as a gesture of goodwill to Russia’s fellow former Soviet state. The RosUkrEnergo deals allowed the company to sell cheap gas from Turkmenistan at much higher rates in Europe, which helped subsidize Ukraine’s domestic market. Gazprom investors criticized the scheme at the time for introducing an unnecessary player in transactions that the Russian monopoly could perform itself. 
 
 ‘Personal Bank’ 
 
 The twin pillars of Putin’s economy, Gazprom, the world’s largest gas producer, and state oil champion OAO Rosneft (ROSN), are already both potential targets of sanctions. Gazprom Chief Executive Officer Alexey Miller and Rosneft CEO Igor Sechin may be among officials banned from the European Union, Germany’s Bild newspaper reported March 15, a move the bloc has yet to carry out in two rounds of sanctions. 
 
 Obama signed a separate order on March 20 authorizing potential penalties on Russian industries such as energy, finance, mining and defense. Bank Rossiya, a St. Petersburg lender founded by three Putin associates in 1990, was put on the sanctions list last for being, as the Treasury Department said, “the personal bank for senior officials.” 
 
 Graphic: What Crimea Is Costing Putin 
 
 Leaders of the U.S., the European Union, China, Japan and others meet in The Hague today, with Obama seeking to mobilize opposition to Putin’s incursion into Crimea. 
 
 Russian anti-corruption activist and opposition leader Alexey Navalny, who’s under house arrest in Moscow, said March 20 that Miller and Sechin, as longtime Putin allies with key positions in his power structure, should be included in any regime of penalties put together by the West. 
 
 ‘Loyal Elite’ 
 
 “Western nations could deliver a serious blow to the luxurious lifestyle enjoyed by the Kremlin’s cronies who shuttle between Russia and the West,” Navalny said in a commentary in the New York Times. (NYT) “This means freezing the oligarchs’ financial assets and seizing their property.” 
 
 Miller, 52, and Sechin, 53, both worked for Putin in the St. Petersburg mayor’s office in the 1990s. Miller, CEO since 2001, declined to comment on the possibility of his inclusion on the blacklist, according to Kupriyanov. Sechin, a former deputy premier who’s overseen Rosneft since 2004 as chairman, then CEO, denounced all Western “threats and blackmail,” according to an e-mailed comment. 
 
 “As far as the loyal elite is concerned, sanctions have always led to a consolidation of forces to counter pressure from outside,” said Sechin, who spearheaded Rosneft’s takeover of Yukos Oil Co. to become Russia’s largest crude producer after the 2003 jailing of Yukos owner Mikhail Khodorkovsky. 
 
 Excluding Miller and Sechin leaves “headroom for additional sanctions,” said Cliff Kupchan, an analyst at Eurasia Group in New York. So far, the U.S. sanctions have been “targeted,” unlike the sweeping penalties against Iran over its nuclear program that are designed to sever “vast swathes of the economy” from the West, Kupchan said in a research note. 
 
 FBI Probe 
 
 The U.S. law, if passed by both houses of Congress and signed by Obama, would authorize the president to impose sanctions against Russian officials or their associates or family members involved in the “expropriation of private or public assets for personal gain, corruption related to government contracts or the extraction of natural resources, bribery, or the facilitation or transfer of the proceeds of corruption to foreign jurisdictions.” 
 
 Firtash, worth $2.3 billion according to Kiev-based Korrespondent magazine, was arrested March 14 on suspicion of bribery and criminal conspiracy, according to an Austrian police statement. The charges are the result of several years of investigation by the FBI and aren’t “related to recent events in Ukraine,” the U.S. Department of Justice said. 
 
 Firtash, who owns titanium assets in Crimea, paid a record 125 million-euro ($172 million) bail on March 20 to win release during extradition hearings. He criticized his arrest as a “purely political” act. 
 
 Boeing, India 
 
 The case involves allegations of bribes paid by a Swiss company controlled by Firtash, Bothli, to obtain licenses to mine titanium ore in Andhra Pradesh with a state-run Indian company and build plants to produce titanium sponge with Boeing Co. (BA) in India, according to two people familiar with the investigation who asked not to be identified. 
 
 Boeing agreed in 2006 to conduct a feasibility study into the project with Bothli and then decided not to pursue it, the Chicago-based company said in an e-mailed response to questions. Firtash’s point man for the project, Suren Gevorgyan, said Bothli never paid a bribe to get permits because India was eager to receive Boeing’s planned investment. 
 
 The charges seem designed to get Firtash inside the U.S. and persuade him to cut a deal for information about Gazprom and people close to Putin, Ariel Cohen, senior fellow at the Heritage Foundation in Washington, said by phone. 
 
 ‘Severe Consequences’ 
 
 “Firtash was very deeply involved in the fine print of Gazprom’s dealings in Ukraine, in the financial transactions,” said Korchemkin of East European Gas Analysis. “If Firtash strikes a deal with the FBI and starts to give testimony it could threaten severe consequences for Gazprom managers and the company itself.” 
 
 Any disclosure that shows Gazprom managers causing losses to U.S. investors, who hold more than half of the company’s depositary receipts, could lead to sanctions, major fines and lawsuits, Korchemkin said. Putin’s political protege, Prime Minister Dmitry Medvedev, was Gazprom’s chairman in 2002-2008. Medvedev’s spokeswoman, Natalia Timakova, declined to comment on the possibility that the premier may face sanctions. 
 
 “These sanctions are designed to touch important people close to the Kremlin and have a geopolitical impact rather than a direct effect on earnings at other banks,” said Hadrien de Belle, an analyst at Keefe Bruyette & Woods, a New-York based financial services company. “This has to be perceived as going after the financial conduits for the wealth of the targets.” 
 
 Abramovich, Usmanov 
 
 Two other billionaires close to Putin, former Gazprom adviser Alisher Usmanov and Roman Abramovich, both of whom are shareholders of London soccer clubs, are prime candidates for sanctions, said Navalny, the opposition leader. 
 
 The bulk of Abramovich’s $14 billion wealth, according to the Bloomberg Billionaire’s Index, came from the sale of OAO Sibneft, the oil company he acquired for about $100 million in 1996. He sold it to Gazprom for $13 billion a decade later. Abramovich’s spokesman, John Mann, declined to comment. 
 
 Usmanov, 60, is Russia’s richest man, with a fortune of $17.4 billion. He cut his U.S. stock holdings this year, selling his shares in Apple Inc. and reducing his interest in Facebook Inc., according to Ivan Streshinskiy, head of Usmanov’s asset-management company USM Advisors LLC. 
 
 Sanctions are “counterproductive” for all parties involved because the global economy is interconnected, Usmanov told reporters in Moscow on March 20. He didn’t respond to requests for comment sent to his representatives. 
 
 “Everyone has to decide whether they want to bring back their assets to Russia and stay within sealed borders,” Lipman of the Carnegie Center said. “This is a bleak prospect for many people.” 
 
 To contact the reporters on this story: Irina Reznik in Moscow at ireznik@bloomberg.net; Henry Meyer in Moscow at hmeyer4@bloomberg.net 
 
 To contact the editors responsible for this story: Hellmuth Tromm at htromm@bloomberg.net; Balazs Penz at bpenz@bloomberg.net Brad Cook ||||| Media playback is unsupported on your device Media caption David Cameron: "There's not going to be a G8 summit this year in Russia" 
 
 The G8 summit will not take place in Russia this year, UK Prime Minister David Cameron has said. 
 
 Speaking in the Netherlands, Mr Cameron said it was "absolutely clear" the planned June meeting of world leaders in the Russian resort of Sochi would not happen owing to events in Ukraine. 
 
 The EU and US have imposed sanctions on Russian officials after Russia's annexation of Crimea from Ukraine. 
 
 Moscow has also been warned of further action if it does not change course. 
 
 The announcement that the Sochi meeting had been effectively cancelled came after Russian troops seized control of the last major military base in Crimea. 
 
 Mr Cameron, US President Barack Obama and other G8 leaders are attending a nuclear co-operation summit in The Hague, to which Russian President Vladimir Putin was not invited. 
 
 'Illegal annexation' 
 
 "We should be clear there's not going to be a G8 summit in Russia," Mr Cameron said, urging Russia to "change course". 
 
 The G7 leaders plus EU representatives issued a declaration after their meeting in The Hague noting that "international law prohibits the acquisition of part or all of another state's territory through coercion or force". 
 
 Image copyright AFP 
 
 "To do so violates the principles upon which the international system is built," they said. 
 
 "We condemn the illegal referendum held in Crimea in violation of Ukraine's constitution. We also strongly condemn Russia's illegal attempt to annex Crimea in contravention of international law and specific international obligations. We do not recognise either." 
 
 Russia's actions would have "significant consequences", they continued. 
 
 "We remain ready to intensify actions including coordinated sectoral sanctions that will have an increasingly significant impact on the Russian economy, if Russia continues to escalate this situation. 
 
 "Russia has a clear choice to make. Diplomatic avenues to de-escalate the situation remain open, and we encourage the Russian government to take them." 
 
 UK Foreign Secretary William Hague said there was an increasing recognition that European leaders wanted to stop relying so heavily on Russian oil and gas. 
 
 The G7 had to be prepared to take more far-reaching measures in response to the developments, he said. 
 
 The UK and other G8 nations suspended their preparations for the Sochi summit last month as the crisis in Ukraine intensified and hinted that they could meet without Russia. 
 
 Several G8 members have also called for Russia's membership of the powerful body to be suspended. 
 
 The BBC's Europe correspondent Matthew Price said the end of the Sochi summit was a recognition of Russia's isolation on the global stage as a result of what it had done in Ukraine. 
 
 The US, UK and other countries, he added, were making clear they did not want Russia "in their club" unless it reconsidered its actions in Crimea.
– The other seven members of the G8 are calling off the meeting Russia was supposed to host in Sochi in June, David Cameron revealed today. Cameron, President Obama, and the other leaders of the G7 nations—which is to say the G8 minus Russia—are holding an emergency meeting at the Hague today, on the sidelines of a nuclear summit. "There's not going to be a G8 summit in Russia," Cameron said, according to the BBC. "That's absolutely clear. … Frankly, it is Russia that needs to change course." If Russia doesn't change, the nations have hinted that more sanctions could be on the way—and that could be bad news for Russia. Some banks are predicting that the sanctions already have Russia headed toward recession. The Russian bank SMP has seen $258 million withdrawn since the US sanctioned it, according to Voice of America. Ordinary Russians feel it is they, not Vladimir Putin or his inner circle, who will be hurt most, USA Today reports. But the US might have a secret weapon; Bloomberg has a fascinating piece on a Russian billionaire currently being detained on a US warrant who might fork over crucial information on Gazprom that could really hurt Putin's inner circle.