Russia’s invasion of Georgia has shocked the west and spurred talk about how to respond. The conventional wisdom is that the west can do little to punish Russia. True, western governments have limited leverage, but in economic terms the Russian invasion has already hit it hard, even before western governments lifted a finger. This economic blow shows the west how it can punish Russia’s leaders.

On the fateful day of August 8, Russia’s stock market plummeted 6.5 per cent. It has now fallen 36 per cent in the past two months, wiping out $500bn (€346bn, £281bn) of shareholders’ capital, almost equal to Russia’s international currency reserves of $580bn. During the week of the invasion, capital outflow reached $16bn, causing a sudden domestic credit squeeze. Two wealthy Russians have been identified as among the biggest sellers of Gazprom stock . They cannot have been happy with Vladimir Putin, the Russian prime minister. Indeed, Mr Putin’s boasts about Moscow as a new global financial centre and the rouble as a coming international reserve currency have become a sad joke.