Russian stocks fell to their lowest since 2006 on concerns that the recognition of two breakaway Georgian regions will renew tensions in the area, while lower oil prices may curb the earnings of energy companies.

VTB Group, the country's second-biggest bank, dropped the most since its initial public offering last year, while Surgutneftegaz tumbled to the lowest in four years as oil traded below $115 per barrel.

The dollar-denominated RTS Index declined 3.2 percent to 1,647.67, a level not seen since November 2006 and the biggest loss among 102 global indexes tracked by Bloomberg. The ruble-denominated MICEX sank 3.9 percent to 1,320.58, the lowest since September 2006.

The RTS fell 28 percent this quarter, the steepest drop among the world's 20 biggest equity markets, as this month's war in Georgia and tumbling oil prices helped shake investor confidence. The parliament passed a resolution Monday calling on President Dmitry Medvedev to recognize the independence of the Georgian regions of South Ossetia and Abkhazia.

"Politics is weighing on the market," said Konstantin Demchenko, head of trading at Everest Asset Management.

VTB tumbled 0.48 kopeks, or 6.6 percent, to 6.85 kopeks, the lowest since the company's IPO in June 2007.

VTB's larger rival Sberbank sank 3.05 rubles, or 4.9 percent, to 59.86 rubles.

State Duma Speaker Boris Gryzlov, said he expected Medvedev to respond to calls for recognizing the breakaway regions of Georgia "in a very short time," Interfax reported.

"There is a very real danger of an escalation of the conflict in Georgia, actual or diplomatic, that could result in serous threats of international retaliation," UralSib chief strategist Chris Weafer wrote in a note today.

Surgutneftegaz fell 1.12 rubles, or 6 percent, to 17.391 rubles, the lowest since February 2004. Crude futures were little changed at $114.60 in New York today after tumbling 5.4 percent on Aug. 22.

Mosenergo fell 19.3 kopeks, or 6.8 percent, to 2.656 rubles. Citigroup started coverage of the power generator serving Moscow with a "sell" recommendation and a price estimate of 2.34 rubles, citing high spending budgets that may prevent the company from generating free cash flow until 2012.