Russian PM Warns On Contracting Economy

Russia's prime minister Dmitry Medvedev has warned his country "will be forced to develop in a different economic reality" if oil prices remain weak and sanctions continue.

His comments appeared to contradict president Vladimir Putin, who said only last week that the worst of the economic crisis facing the country had passed.

Speaking to the Russian parliament, Mr Medvedev estimated Russian GDP contracted by 2% in the first quarter of the year.

Should that prove right, it would be the first quarter of negative growth in Russia since 2009.

But the Russian PM said the crises engulfing Russia could not have been avoided.

He said: "Unprecedented political and economic pressure is payback for our position."

The former president asked: "Could Russia have avoided this economic scenario? The answer is no it could not."

Last year the Russian currency, the rouble, collapsed and inflation then moved into double digits with food pricing rocketing and real wages falling by 9.3%.

Last week official statistics revealed that Russia's foreign trade fell 26%.

The sharp change in the Russian economy occurred after western sanctions were imposed following the crisis in Ukraine including the shooting down of flight MH17 amid a demise in world oil prices.

Mr Medvedev said: "Experts say that the overall damage to Russia was €25bn, that is 1.5% of the GDP, and in 2015 it could be several times that."

But the decision to annex Crimea was "the only one possible, and we all ... supported it, knowing the possible consequences," he added.

Mr Medvedev also warned that: "In terms of intensity, the latest wave of sanctions could be the strongest that the West had imposed on Moscow in either the Soviet or post-Soviet period.

"We should not have any illusions, these are not just short-term crisis events.

"If sanctions intensify and oil prices stay at extremely low levels, we will be forced to work in a different economic reality.

Mr Putin admitted last year that the Russian economy had failed to diversify under his leadership.

He pledged efforts then to grow investment away from the oil and gas industries to help a rebalancing and provide a buffer to future financial shocks.