Putin’s Ukraine Gambit Hurts Economy as Allies Lose Billions

President Vladimir Putin’s brinkmanship in Ukraine has already cost some of his closest comrades billions of dollars. The other 144 million Russians may also pay a price.

Putin’s troop buildup in Crimea triggered the biggest stock selloff in five years on March 3. It also pulled the ruble to a record low, prompting the central bank to raise interest rates the most since 1998, when a cash-strapped government stumbled toward default. Longtime Putin ally Gennady Timchenko and his partner Leonid Mikhelson lost a combined $3.2 billion of their wealth after their gas producer OAO Novatek tumbled 18 percent.

“Russia will be the big loser of the crisis in Ukraine,” said Timothy Ash, chief emerging-market economist at Standard Bank Group Ltd. in London. “There’ll be a big hit to domestic and foreign confidence, less investment and likely increased outflows, likely losses for Russian banks with exposure in Ukraine, a weaker ruble and weaker growth and recovery.”

The tensest standoff with the West since the end of the Cold War is exposing the weakness of an economy rebuilt on the back of the energy industry. With oil and gas accounting for more than half of all exports and energy prices stagnant, the growth potential is all but exhausted, prompting officials in Moscow to sound the recession alarm even as the country’s main trading partners recover.