Russia's currency dropped to an all-time low against the dollar on Tuesday as investors fret about long-term economic damage from Western sanctions.
The United States and the European Union last week imposed a new round of sanctions against Russia for its actions in Ukraine that consisted in, among other things, blocking off Western financial markets to key Russian companies.
The Russian currency fell more than 1 percent to 38.80 rubles against the US dollar by noon Moscow time Tuesday. The ruble has lost over 2.7 percent in just two days.
Russia will create a multi-billion dollar anti-crisis fund in 2015 of money destined for the Pension Fund and some left over in this year's budget to help companies hit by sanctions, Finance Minister Anton Siluanov was quoted as saying on Monday.
Some companies have asked the government for help, including the country's top-oil producer Rosneft which said it would need 1.5 trillion roubles ($39.70 billion) in aid.
The Russian Central Bank allows the ruble to trade in a range against the dollar and sometimes intervenes in markets to prop it up. It has not been doing so in the past months, however, leaving the ruble to trade only 0.40 rubles away from the minimum level.
Economist Alexei Kudrin, who served as finance minister under President Vladimir Putin for 11 years until 2011, said Tuesday that the sanctions could send Russia into a long recession.
"The sanctions that have been imposed are going to have an effect (on the economy) for the next one or two years because they have limited opportunities for investment in this uncertain environment," Russian news agency Interfax quoted him as saying.
Most recently, the US on Friday tightened the maximum credit duration for several state-owned Russian companies and banks to 30 days, effectively shutting them off from long-term loans. The US and the EU indicated they may reverse some of the sanctions if they see Moscow supporting the peace process in Ukraine, where more than 3,000 have died since mid-April.
Opel Group, the European arm of General Motors, is cutting production and shedding around 500 jobs in Russia, hit by the weak Russian rouble and a plunge in local demand due to a slowing economy and Western sanctions.
Opel said on Tuesday it would cut production at its plant in St. Petersburg where it builds the Opel Astra and Chevrolet Cruze compact models, to one shift per day from two.
It will also offer voluntary severance packages to about a quarter of the plant's 2,000 staff and accelerate a move to use more local suppliers - a shift that will help it to cope with a weakening Russian rouble.
The rouble is this year's biggest-declining major emerging currency, having lost more than 15 percent in value to hit a new low against the US dollar on Tuesday.
Market jitters were further fueled by reports that the Russian government is preparing more retaliatory import bans, which could ultimately hurt Russian consumer spending. Russia in August banned imports of dairy products, meat and vegetables from the EU and the US, causing price hikes for some items.
Amid the uncertainty, investors continue to pull money out of the country at an accelerating pace. Experts like Kudrin predict some $110 billion could be withdrawn this year, almost twice as much as last year's $61 billion.