Prime Minister Donald Tusk has said that sanctions imposed on Russia after the annexation of Crimea are having effects on the country's financial markets.

PM Tusk at press conference in Warsaw on Tuesday: photo - PAP/Radek Pietruszka

"The first real and noticeable effects of sanctions can be seen on the stock market, on the stocks of the largest companies in Russia, the ruble exchange rate and the outflow of foreign capital investment," Donald Tusk said on Tuesday following asset freezes and visa bans imposed on Russian officials by the US and EU.

Russia's economy is heading for a crisis, Tusk added, and the crisis in Ukraine has concentrated minds in Europe on lessening its reliance on Russian energy supplies, he said.

According to a report by Russian state-owned bank VTB Capital, the country's economy - the 9th largest in the world - will shrink over the next two quarters as uncertainty hurts domestic spending and investment plans.

"Faced with heightened uncertainty, firms are delaying investment and hiring, while households choose to postpone discretionary spending," says the bank's Russian Economy Monthly report.

The ruble fell by 8.9 per cent so far this year against the US dollar, making it the second-worst performing currency behind the Argentine peso, according to data from Bloomberg.

US president Barack Obama called on Russia to respect international norms at the end of the two-day nuclear security summit in the Hague on Tuesday.

"If it fails to do so then there will be costs," Obama said.

US President Barack Obama disembarks from the 'Air Force One', upon his arrival at Brussel' Airport, in Brussels, Belgium, 25 March 2014. US President Barack Obama will visit the America Flanders Field cemetery in Waregem and have several meeting with the leaders of the European Institutions on 26 March. EPA/JULIEN WARNAND

"Russia is a regional power that is threatening some of its immediate neighbours, not out of strength but out of weakness. We [the US] have considerable influence on our neighbours. We generally don't need to invade them in order to have a strong cooperative relationship with them," he added.

A US official has told Reuters that during Obama's talks in Brussels on Wednesday with NATO's secretary general, "we'll be discussing very specifically what more can be done in terms of signaling concrete reassurance to our Eastern European allies."

Poland's foreign minister Radoslaw Sikorski will be travelling to Kiev and the Russian-speaking dominated Odessa further east in Ukraine on Wednesday, where he will be having talks with the interim prime minister and president.

Foreign Ministry spokesman in Warsaw Marcin Wojciechowski told reporters that the visit is "a sign of support for the new government and reform, transformation and democratization in Ukraine".

Meanwhile, Ukraine's interim Defence Minister Ihor Tenyukh, lost a vote of confidence in parliament and was sacked on Tuesday over his handling of the crisis, after it emerged that fewer than a quarter of Ukrainian soldiers in Crimea plan to stay in the military.

MPs elected Mykhailo Koval, head of the Ukrainian border guard to take over at the defence ministry. (pg)



source: IAR/PAP