Russian Prime Minister Dmitry Medvedev said Tuesday that the country’s economy fell into recession in the first quarter, thanks largely to sanctions imposed by the European Union and the U.S. after Moscow annexed Crimea early last year. Addressing members of the lower house of Russia's parliament, Medvedev said the sanctions cost Russia $27 billion, or 1.5 percent of gross domestic product.
A nearly 50 percent drop in oil prices and a crashing ruble tipped the world’s largest energy exporter into recession at the end of last year for the first time since the global economic crisis of 2007-09. But Moscow is laying most of the blame on the Western penalties for its annexation of a strategically important region of southern Ukraine many Russians believe is more culturally tied to Russia.
“The unprecedented political and economic external pressure is the price for our position,” Bloomberg quoted the prime minister as saying. “But everyone -- authorities and our society -- understood that we had no other way, whatever threats we may face.”
Russia’s central bank said last month that the country’s economy contracted 0.7 percent in the first quarter, but now it appears the contraction was much deeper and closer to 2 percent.
The sanctions began in March 2014 and have targeted Russian banks, energy and defense firms. The measures also have resulted in seizures of Russian assets in the U.S. and Europe, and travel bans on individuals with close ties to Russia's government. In addition, Russia has been cut off from access to international financial markets and wealthy Russian investors have sent their cash to safe havens abroad.
Medvedev warned lawmakers that if oil prices continue to remain low and “external pressure increases,” then “we’ll have to develop in a different economic reality, which will test our strength in full.”
Meanwhile, the European Union on Wednesday will formally accuse Russian gas giant Gazprom of abusing its position as Europe’s top supplier of natural gas to shut out competitors, Financial Times reported.
The European Commission has insisted that it’s treating Gazprom like any other company, but Moscow views the move as a political tactic. The charges against Gazprom precede the annexation of Crimea, and were temporarily set aside amid the crisis in Ukraine. Once the official complaint is filed, Gazprom will have 12 weeks to respond or settle the dispute.
Gazprom was exempted from Crimea-related sanctions because of Europe’s dependence on its energy exports, but the energy company is suspected of inflating prices and imposing unfair gas distribution restrictions within Europe.