Moscow: The fallout from the annexation of Crimea will cost Russia`s economy up to $200 billion over the next few years, a former finance minister said on Tuesday.
Alexei Kudrin, an esteemed economist who is believed to have the ear of President Vladimir Putin, said annual payouts to the region would set Moscow back up to $7 billion but that the overall economic costs would be much greater.
"Financing of Crimea will cost us around $6-7 billion a year," Kudrin told reporters.
"All indirect and other losses like capital flight are of course much higher. They can total $150-200 billon over the next three to four years."
"That`s the price," he said, pointing to factors such as a loss of confidence by investors and new "rules of the game."
The annexation of Crimea and Moscow`s support for separatists in eastern Ukraine sank Russia`s ties with the West which has imposed harsh economic sanctions. Moscow has in return banned EU and US food exports.
The fallout from the Ukraine crisis and tumbling oil prices have plunged the country into financial crisis.
But the Russian government claims the worst could be over for the country`s troubled economy, pointing to a recent rebound of the ruble amid the steadying of oil prices and a lull in fighting in Ukraine.
But Kudrin warned officials against excessive optimism, forecasting stagnation over the next five years even if the government manages to carry out structural reforms.
"We are almost doomed," he said. "This is the most serious challenge the president faces."
Kudrin urged Putin, who this month marks 15 years since being elected to his first term as president, to use his robust popularity ratings to push through genuine reforms.
"If this rating is not used to carry out reforms then this rating will just be for the sake of a rating."