Russia retaliates against Western sanctions; Moscow Stock Exchange still closed

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As the drumbeat of Western sanctions against Russia gets louder, Moscow is looking to fight back and insulate its economy from the penalties. Vladimir Putin has already hardened capital controls, banning all Russian residents and companies from transferring foreign currency abroad to prop up the plummeting ruble. The steps include a ban on payments of hard currency made to foreigners "in connection with [new] loan agreements," and some say it could even lead to a default on Russian debt, an occurrence that last happened in 1998 and Russia vowed never to happen again.

Commentary: "Putin is himself now cutting Russia off from international capital markets for a very long time. Russia's financing costs will stay elevated for a long time - even the Chinese will not lend," said economist Timothy Ash, a specialist in Russian government debt. The Moscow Stock Exchange was shuttered all day on Monday and it will be closed today as well.

Meanwhile, Russia has barred airlines from 36 countries from its airspace, in an effort to hit back at the widening raft of Western sanctions (even the neutral Swiss have jumped on the train). Russia is also debating whether to retaliate by freezing Western assets and may pull out of the New START nuclear arms control treaty that limits the U.S. and Russian nuclear arsenals. Scrapping the agreement could raise new threats to global security after Moscow's decision to put its nuclear deterrent forces on "high alert."

"Today, some French minister has said that they declared an economic war on Russia. Watch your tongue, gentlemen!" tweeted Dmitry Medvedev, Russia's top security official. "And don't forget that in human history, economic wars quite often turned into real ones."

On the ground: Fighting is intensifying across Ukraine as talks on a potential ceasefire ended with no deal on Monday. There were also reports on the use of banned cluster munitions and vacuum bombs amid heavy shelling on civilian areas in Ukraine's east. Russian ground forces are still massed 16 miles north of Kyiv, and the country is said to be sending a large reinforcement of convoys across the border, in what could be preparation for a renewed push to besiege the Ukrainian capital.

Premarket movement of Russian ETFs: RUSL -40%, RSX -6%, ERUS -3%, RSXJ