World Bulletin/News Desk
Prime Minister Dmitry Medvedev said on Friday that Russia would not isolate its sanctions-hit economy from the West but said improving relations with Asian countries has become a key strategy.
Sanctions imposed by the West over Moscow's involvement in the separatist conflict in Ukraine have limited Russia's access to foreign cash, sent the rouble to historic lows and slowed economic growth to a crawl.
Moscow in retaliation has imposed sanctions on Western countries. Some politicians and economists, including the head of the nationalist Liberal Democratic Party of Russia, Vladimir Zhirinovsky, and an economic adviser to President Vladimir Putin, Sergei Glazyev, have called for isolating the Russian economy from Western markets.
"Any discussions about fundamental changes to the model of economic development, in the direction of a mobilisational or closed economy, are inappropriate and unnecessary," Medvedev told a business conference in the Black Sea resort of Sochi.
He said Russia is ready to work on improving its relations with the European Union and the United States, which are currently at their worst since the fall of the Soviet Union, but said Moscow's partners must "learn to listen to Russia."
"History shows that any attempts to put pressure on Russia have been unsuccessful," he told a crowd of mostly Russian businessmen and politicians.
Following Russia's annexation of Ukraine's Crimea region in March and Western penalties for the move, Moscow has embarked on a pivot to Asia, signing a series of trade and business agreements, mainly with China.
The country's top gas producer, state-controlled Gazprom , struck a 30-year $400 billion gas supply deal with China in May.
Medvedev said things are not moving as fast as needed when it comes to improving those relations. But Russia's pivot East is an "absolutely objective" development, he said.
"This is the natural course of events and a thought-through response to the changing conditions of economic development."
Much work is still needed to improve political and corporate trust between Russia and Asian partners, but the benefits of the tactical shift would be far-reaching, he said.
"The growth of our country's role in the Asian region ... without doubt contributes to raising our authority in other places as well, including in the West."
Russia's government has promised to support those companies which, under EU and U.S. sanctions over Ukraine, are unable to access Western markets. Rosneft and Novatek, both run by allies of President Vladimir Putin, have signalled they will need help, with Rosneft asking for $40 billion.
Finance Minister Anton Siluanov was quoted by Itar-Tass news agency as saying the government was considering a proposal by the two companies for the wealth fund to invest 80 to 150 billion roubles in their bonds.
"We are considering the proposals ... I think that in this year we will be able to take such decisions," he said, adding that the proposals were for investment of up to 150 billion roubles in each company, Tass reported.
The government has so far avoided pushing the country into debt, instead planning on using reserves - including those set aside for Russia's 40 million pensioners - to support what Putin calls the country's "national champions", pillars of the economy in sectors such as energy and defence.
The National Wealth Fund was set up to support the pension system, which will be stretched in the future as the population ages and the working population shrinks. Using these funds has raised concerns that Russia is robbing the future to pay for today.
Russian officials are increasingly split over how to boost companies and an economy that is teetering on the brink of recession due to the sanctions imposed on its leading state companies and banks over Moscow's role in the Ukraine crisis.
The budget for 2015 to 2017 relies on high oil prices to cover social spending promises and offers little to those who want to see investment in companies to try to kick-start an economy expected to grow only 0.5 percent this year.
Rosneft, led by Igor Sechin, a long-time ally of Putin, has grown rapidly since it took over most of the assets from Yukos in the mid-2000s, and acquired rival TNK-BP last year, amassing large debts.
It will need to repay $26.2 billion between July this year and December 2015, with peak repayments of $9.4 billion in the fourth quarter this year and $11.8 billion in the first quarter next year, Moody's rating agency said in a July note.
Novatek, co-owned by Gennady Timchenko, another Putin ally, has good liquidity, with only a $350 million syndicated loan maturing within the next 18 months, according to Moody's.
However, Timchenko has admitted that the sanctions have deterred financing from European as well as U.S. banks - complicating investment projects such as its flagship $27 billion Yamal liquefied natural gas project in the Arctic.