The rouble ended the week close to an all-time low following Moscow’s decision to ban most food imports from the West in retaliation for sanctions over Ukraine and warnings from Nato that Russia appeared ready to invade its neighbour.

Analysts said any positive impact on Russia’s balance of payments from Thursday’s ban was outweighed by an investor exodus due to the conflict since mid-April between pro-Russian rebels and government forces in eastern Ukraine.

“The markets are preparing for the worst based on what’s going on in east Ukraine, where the fighting continues, no one wants to agree with anyone and Russia is building up troops on the border,” said Igor Akinshin from Alfa Bank.

The rouble eased 1.5 per cent versus the dollar this week, not far off an all-time low of 36.73 reached in March after Russia annexed Ukraine’s Crimea peninsula. Dollar denominated Russian stocks were down 3.5 per cent.

The ban on all meat, fish, dairy, fruit and vegetables from the United States, the 28 European Union countries, Canada, Australia and non-EU member Norway will last a year, showing President Vladimir Putin is preparing for a long stand-off.

A stronger than expected measure, it could isolate Russian consumers to a degree unseen since Soviet days. Sanctions and the currency’s slide have already bankrupted several airlines and tourist firms, ruining summer holidays for many Russians.

The government has also upset the middle class by approving a plan to use contributions to employees’ privately managed pension funds to plug budget holes for a second year running.

In a sign ordinary Russians’ purchasing power is declining, car sales slumped 23 per cent year-on-year in July after a 17.3 per cent decline in the revious month.

Russians tracked the rouble-dollar rate very closely in the 1990s and early 2000s as they saw the US currency as the best protection against galloping inflation.

That attitude has changed during Putin’s 14-year rule, when relative macroeconomic stability on the back of high oil prices allowed people to forget about foreign exchange rates.

That now seems to be coming to an end with the bans likely to push inflation well above the government’s targets and disappointed investors sending billions of dollars abroad as capital flight accelerates.

Analysts polled by Reuters at the end of last month predicted that capital outflows would reach $118 billion this year, almost double last year’s figure.