The impact of Western sanctions on the Russian economy was stronger that anybody could have expected, financier George Soros has written in an article "A New Policy to Rescue Ukraine" published in The New York Review of Books.

"The sanctions imposed on Russia by the US and Europe for its interventions in Ukraine have worked much faster and inflicted much more damage on the Russian economy than anybody could have expected," Soros said, noting that without a sharp decline in the price of oil the sanctions would not have been so effective.

"The combination of lower oil prices and sanctions has pushed Russia into a financial crisis that is by some measures already comparable to the one in 1998," Soros said.

According to the article, a significant difference from 1998 is that Russia has large international reserves, but some of them have already been spent to stabilize the ruble exchange rate, and of the remaining funds only about $200 billion is liquid, despite the fact that the crisis is only at an early stage.

Soros said that in addition to continued capital flight, more than $120 billion of external debt is due for repayment in 2015.

"Although, in contrast to 1998, most of the Russian debt is in the private sector, it would not be surprising if, before it runs its course, this crisis ends up in a default by Russia. That would be more than what the U.S. and European authorities bargained for," Soros wrote, noting that a Russian default could cause considerable disruption in the global financial system, with the euro area being particularly vulnerable.

Soros described the sanctions as a "necessary evil" as they help "resist Russian aggression," but hurt not only the country on which they are imposed but also the countries that impose them.

"The harm has turned out to be much bigger than anybody anticipated. Russia is in the midst of a financial crisis, which is helping to turn the threat of deflation in the eurozone into a reality," the article says.

The financier said that there was an urgent need to reorient the current policies of the European Union toward Russia and Ukraine.

"I have been arguing for a two-pronged approach that balances the sanctions against Russia with assistance for Ukraine on a much larger scale. This rebalancing needs to be carried out in the first quarter of 2015," Soros said.

At the same time, he said that sanctions against Russia should not be lifted until their main goal is achieved – stabilization in the east of Ukraine. Soros believes that there is reason to expect a full cease-fire in the near future.