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A landmark ruling by an international arbitration court has dealt Russia and the world鈥檚 largest publicly traded oil company, Rosneft, a serious financial blow.

The Permanent Court of Arbitration, based in The Hague, ruled that Russia must pay聽$50 billion聽to the former shareholders of Yukos to compensate them for their lost assets when Yukos was expropriated by the Russian government.

Back in 2005, the Russian state accused the private oil firm Yukos of tax evasion and threw the company鈥檚 leader, Mikhail Khodorkovsky, in jail. The $40 billion company was taken over by the government, with most of its assets handed over to Rosneft, the state-owned oil company. Rosneft is now the world鈥檚 largest publicly traded oil company by production.

Once the richest man in Russia, Khodorkovsky spent 10 years in prison before being pardoned by Russian President Vladimir Putin in December 2013. Yukos鈥� shareholders, meanwhile, pursued international arbitration to recover their seized assets, and the ruling on July 28 granted them victory.

To be sure, actually extracting payment from Russia for the $50 billion awarded by the court will be exceedingly difficult. Russia called聽the court鈥檚 decision聽a 鈥減olitically biased decision,鈥� and vowed to appeal.

But whether or not Russia pays up, the court鈥檚 decision will inflict economic pain on the Russian economy. Rosneft was not a defendant in the arbitration case, but since it owns the assets of the defunct Yukos, it took a beating from the markets after news broke of the court鈥檚 decision.

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Yields on Rosneft鈥檚 Eurobonds reached 6.90 percent -- their聽highest levels聽in over 12 weeks. Rosneft鈥檚 share price also dropped 2.1 percent on July 28.

And since the $50 billion levy represents around 2.5 percent of Russia鈥檚 total economic output, the court decision could weigh on Russia鈥檚 broader economy. The Moscow stock exchange (MICEX) was聽off 2.7 percent聽on July 28, as well. (Related Article:听As Russia鈥檚 Isolation Grows, Oil Companies Caught in Middle)

鈥淭oday鈥檚 news adds fuel to the fire and increases the pressure on Rosneft鈥檚 Eurobond prices, which have been underperforming the market,鈥� Dmitry Makarov, an analyst at the Moscow-based UralSib Capital, told聽Bloomberg News.

On the other hand, the pressure on Russia鈥檚 economy was already worsening in the wake of the July 17 downing of a Malaysian Airlines passenger plane carrying 298 people, apparently from an area of Ukraine held by pro-Russian separatists suspected of using a Russia-supplied missile. The incident appears to have pushed many European leaders to overcome their hesitation at enacting punishing sanctions on Russia.

US President Barack Obama, and his counterparts in France, the UK, Germany, and Italy participated in a聽five-way videoconference聽on July 28 and agreed to take additional measures to isolate Russia. 鈥淭he five heads of state and government confirmed, under these conditions, their intention to adopt new measures toward Russia,鈥� French President Francois Hollande聽said in a statement. German Chancellor Angela Merkel鈥檚 decision to move forward with additional sanctions proved to be critical in convincing France and Italy, according to聽The New York Times. Germany has been cautious thus far, given the fact that its economy is intricately tied to Russia鈥檚, so Merkel鈥檚 new resolve is an important change.

Rosneft has already been the target of western sanctions, with President Obama聽recently moving to block聽it from obtaining loans with maturities longer than 90 days. The sanctions could complicate Rosneft鈥檚 ability to refinance $112 billion in debt that is maturing over four years,聽according to a report from Moody鈥檚 Investors Service.

Europe appears to be on the verge of enacting聽similar restrictions on long-term financing聽for Russia鈥檚 state-owned banks 鈥� taking European action against Russia to a new level 鈥� but still stopped short of cracking down on Russia鈥檚 energy sector.

The cumulative impact of the multiple rounds of sanctions, plus the latest court decision, is casting a cloud over the Russian economy, which could dip into recession this year. The onslaught may not let up, particularly since there is evidence to suggest that聽Russia has only stepped up its involvement聽in Ukraine鈥檚 civil war since the downing of the Malaysian Airlines flight. Russia may not feel the need to back down, but its economy is paying the price.

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