Sanctions will badly squeeze Russian economy: ex-Putin aide

A former Russian finance minister and one-time close confidante of Vladimir Putin said the country's already-troubled economy could be in serious difficulty if the West imposes sanctions over Crimea. -- FILE PHOTO: REUTERS
A former Russian finance minister and one-time close confidante of Vladimir Putin said the country's already-troubled economy could be in serious difficulty if the West imposes sanctions over Crimea. -- FILE PHOTO: REUTERS

MOSCOW (AFP) - A former Russian finance minister and one-time close confidante of Vladimir Putin said the country's already-troubled economy could be in serious difficulty if the West imposes sanctions over Crimea.

Mr Alexei Kudrin, who remains well-respected in business circles despite being fired from his post in 2011, said the knock-on effects of Russia's apparent annexation of the Ukrainian peninsula were already being felt.

"I can already say that the credit taps for Russia are being turned off," he said.

"Russian companies have around US$700 billion (S$885 billion)-worth of outstanding loans.

"The amount of money available is already starting to fall because some lines of credit are being stemmed, and this has already started," he said in comments published on his website on Friday.

"That means some joint projects will have to be stopped."

Moscow and the West are facing off over the fate of Crimea, a largely Russian-speaking peninsula in Ukraine, where pro-Kremlin forces have taken control ahead of a referendum on Sunday over whether to join Russia.

Washington and its allies say the referendum is an illegal fig leaf for Russian annexation. Moscow claims it is protecting ethnic Russians who should be allowed to determine their own identity.

The West has threatened economic and political penalties unless Mr Putin withdraws from Ukraine, but with only two days to go before the vote, there is no sign of his backing down.

"I think in these circumstances (economic growth) will be less than 1 per cent, maybe even zero," said Mr Kudrin.

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