MOSCOW – With the price of crude sliding, oil-rich Russia on Monday saw its stock markets take their most brutal one-day beating ever.

The benchmark RTS index plunged by 19.1 percent to 866.4 points, while the MICEX – where the bulk of trading takes place – fell by 18.7 percent to 752 points, the largest single loss ever for both. In a desperate bid to stop the bleeding, trading was suspended three times on MICEX and twice on the RTS – to little apparent effect.

The carnage continued a three-month slide. Since May, Russia's RTS has plunged by 64 percent – almost two-thirds, to its lowest level since August 2005.

“The mood is kind of disbelief. You'd think we would have gotten used to it by now,” said Ron Smith, strategist at Moscow-based Alfa Bank. “Traders are just sitting there staring at the screens and going 'wow.'”

The sell-off began because of fears about growing government interference in business and the fallout from Russia's five-day war with Georgia. But these concerns were eclipsed in September by the carnage on Wall Street and tumbling commodity prices. Russia has seen its fortunes rise with the price of the oil and gas it exports.

The markets are in their worst slump since the 1998 financial collapse, when Russia defaulted on its sovereign debt, the ruble was devalued and banks faced widespread foreclosures.

Since mid-July of this year, investors have pulled out an estimated $50 billion from the country, analysts say. Now, it seems that almost no one is willing to buy.

With oil prices now heading south of $90 a barrel, fears are escalating over the global economic outlook. The government-aided rescues of several European banks and the passage of a $700 billion bailout plan in the United States failed to reassure anyone, it seems.

Russia now sits on the world's third-largest foreign exchange reserves, and has pledged more than $170 billion in support for the country's shattered banking system and stock markets.

While talk of collapse similar to the one in 1998 still seems far-fetched, neither is there much talk here these days – as there was a few months ago – of immunity to the global debt crisis.

Russia's economy has grown at an impressive rate – at an average of 7 percent in the past 8 years – on the back of cheap loans, a rapidly growing consumer economy and the high inflow of foreign investment.

But now years of easy money are at an end, and domestic growth is slowing. Capital markets abroad have seized up, and the Kremlin has been forced to resort to far-reaching measures to persuade domestic banks to start lending to one another again. Added to the mix, Russia is facing soaring inflation – which analysts predict could easily reach 15 percent this year.

Vladimir Putin – who presided over Russia's eight-year oil-fueled boom – can attribute much of his popularity to a robust economy, which led Finance Minister Alexei Kudrin to describe Russia as a “haven of stability.”

While the gap between rich and poor remains huge, Russia's daily flood of so-called petro dollars has recently begun to filter down to the country's lower-income citizens.

Oil remains the backbone of the economy. Through windfall oil profits, Russia has hoarded budget surpluses totalling some $188.7 billion – and has stashed away some $140 billion of that in a reserve fund.

Chris Weafer, chief strategist at UralSib, estimates the country pulls in approximately $1 billion a day when oil sits at around $100 a barrel. But with the price of Urals crude now down in the low-$80s, growth looks perilous indeed.

Kudrin said last week growth could reach 5.7 percent next year – down from the 6.7 percent it previously forecast. That outlook could become much gloomier should the international financial crisis continue.

“The current level of the RTS implies an oil price of $50 a barrel,” said Weafer in a note to investors. “That is $20 a barrel below the critical level for the federal budget. At that level all bets are off in terms of the investment case for Russia.”

Should oil plummet to $50 a barrel, UralSib estimates that growth could tank to 3.4 percent in 2009 – a substantial drop from the 7.8 percent the government is still hoping to achieve this year.

Martin Gilman, the IMF's former representative in Russia, is less convinced of upcoming economic hardship.

“There is going to be a lot of consolidation and failures, but none of the major players. This is what you'd normally see going into the trough of a downward business cycle,” said Gilman. “It's hard to see how this is going to have a significant slow-down effect on the total economy, unless something else happens.”

But with global markets in turmoil, the business of making projections becomes more difficult.

On paper, at least, Russia should be in a strong position.

Oil prices are still historically high, there is still room for business growth in many Russian regions and the country has an enviable financial cushion to withstand an economic shock.

Analysts say these combined should be enough to lure investors. On the other hand, there are no investors to be found.

“It's hard to see what will break this cycle” of falling Russian stock markets, said Alfa's Smith. “The problem is that people are having to revisit their fundamental underlying assumptions – as to what economic growth is going to be, inflation (will be). ... When everything is based on quicksand, nobody really knows what the final answer is going to be.”