President Vladimir Putin signed laws completing Russia's annexation of Crimea on Friday as investors took fright at a U.S. decision to slap sanctions on his inner circle of money men and security officials.
Putin promised to protect a bank partly owned by an old ally, which Washington has blacklisted, and his spokesman said Russia would respond in kind to the latest financial and visa curbs after producing one blacklist of its own.
His allies laughed off the U.S. sanctions, but shares on the Moscow stock exchange - which have lost $70 billion of their value this month - fell sharply after President Barack Obama also threatened to target major sectors of the economy if Russia moved on areas of Ukraine beyond the Black Sea peninsula.
Obama's national security adviser said the world was reassessing its relationship with Russia and Washington was sceptical of Russian assurances that troop movements on the Ukraine border were no more than military exercises.
The financial noose began tightening with Visa and MasterCard stopping processing payments for a Russian bank owned by two brothers on the U.S. blacklist. Finance Minister Anton Siluanov said Russia might cancel its foreign borrowing for 2014 and raise less domestically if the cost of issuing debt rose.
European Union leaders - who like Obama insist Crimea is still part of Ukraine - imposed their own sanctions on 12 people, including Russian deputy prime minister Dmitry Rogozin and two aides to Putin. Canada sanctioned 14 people.
Shaken by the worst East-West crisis since the Cold War, the EU also pledged to cut its reliance on Russian energy and signed a political deal with the pro-Western Ukrainians who took power after Moscow-backed President Viktor Yanukovich's overthrow last month.
In a Kremlin ceremony shown live on state television, Putin signed a law on ratification of a treaty making Crimea part of Russia and another creating two new Russian administrative districts: Crimea and the port city of Sevastopol, where Moscow keeps part of its Black Sea fleet.
Thousands of Russians marked the annexation with fireworks and celebrations in Simferopol, capital of Crimea where the population is around 58 percent ethnic Russian.
"Many people wanted this, to go back, not to the USSR, but to that big country of ours," said Anna Zevetseva, 32. "We are waiting for things to improve and for investment from Russia."
Ukrainian and Tatar residents stayed behind closed doors. Sergey, a 64-year-old Ukrainian businessman who did not want to