By Alexander Kolyandr And Alan Cullison
MOSCOW--President Vladimir Putin accused the West of trying to
subdue and disarm Russia at a defiant annual news conference
Thursday, and blamed "external factors"--chiefly the drop in oil
prices--for the collapse of Russia's currency and stock market.
He acknowledged that Western sanctions over the country's
annexation of Crimea and role in Ukraine were biting, but said the
economic troubles "are payment for our independence, our
sovereignty." He reassured Russians that they would last no more
than two years, as Russia retools its economy away from oil, upon
which it had become overly dependent.
Mr. Putin's comments, the first since the ruble plunged earlier
this week, signal he may hunker down for a long chill in relations
with the West, although he appeared to be softening his stance in
Ukraine.
He appeared to rebuff the pro-Russian separatists' calls to join
Russia, saying, "we are assuming that the common political space in
Ukraine should be restored, but what form it will take it's hard to
say now." Previously, the Kremlin had dodged appeals of separatists
to join Russia.
He admitted no role in causing Ukraine's crisis, and deflected
questions about the presence of Russian troops there as well as
allegations that Russia has stepped up aggressive moves such as
military maneuvers. The U.S., Mr. Putin said, is the source of
aggression.
"It's not a matter of Crimea. We are defending our independence,
our sovereignty and our right to exist. We should all understand
this," he said later in response to a question about whether the
current economic turmoil is "payment for Crimea."
He blamed Russia's widening rift with Europe on the West, saying
"they didn't stop building walls" after the end of the Cold
War.
Russia's financial crisis could become the most serious
political challenge for Mr. Putin in his 14 years in power, as
officials expect a contraction of the economy of at least 4% next
year. So far, polls show support for Mr. Putin remains above 70%,
boosted by his tight control over the media and political system,
as well as his confrontation with the West.
Mr. Putin's annual news conference, before hundreds of Russian
and foreign journalists in a conference center in downtown Moscow,
is a marathon affair carried live on state television and radio
aimed mainly at his domestic audience. Mr. Putin said he's
confident in public support, asserting that "people with their
hearts and souls feel that we, and I, are acting in the best
interests of Russia."
Mr. Putin began the news conference with his traditional
recitation of economic results for this year. After months of
playing down the impact of Western sanctions, Mr. Putin said that
about 25-30% of the current economic problems "are the influence of
sanctions."
The ruble has fallen almost 50% against the dollar this year,
with the currency hitting record lows this week. Russia's central
bank, in a bid to stem the ruble's sharp decline, raised its key
interest rate Tuesday to 17%.
Mr. Putin said the central bank's actions "are on the whole
appropriate, " although "some things could have been done more
urgently," apparently referring to the emergency rate hike. He said
he planned no reshuffle at the Central Bank or in his
government.
He said the government wouldn't "thoughtlessly burn" its
reserves supporting the ruble but would ensure social obligations
are met. With revenues down, however, "we will have to cut some
things," he said, without elaborating.
Mr. Putin signaled he will try to weather the economic storm
with traditional market mechanisms. He again ruled out the
imposition of capital controls to stabilize the ruble, but said the
government would use its "influence" to encourage state companies
to sell more of their export proceeds on the domestic market to
ease pressure on the ruble.
In a sign of how nervous the business community has become, the
share price of conglomerate AFK Sistema rose nearly 150 % after Mr.
Putin, in an apparent effort to calm investors, said that
money-laundering allegations against its owner, Vladimir
Yevtushenkov, had not yet been proven. He added that he would
invite the billionaire tycoon to a meeting with business leaders to
be held Friday
Mr. Yevtushenkov, who has denied wrongdoing in the case, was
released from house arrest late Wednesday but still faces
charges.
Mr. Putin said the economic troubles also reflect what he called
Russia's failure to diversify its economy. A further decline in oil
prices is possible and that could lead to more drops in the ruble,
he said. The current weakness could last up to two years, he said,
during which "the economy will naturally adapt to the new
conditions of low oil prices."
"It's inevitable that the situation will get back on a normal
track" and that the economy will rebound as Russia shifts away from
its dependence on the energy industry. "Life itself will force us,"
he said, because lower energy prices will stimulate investment in
other sectors that had been neglected in the past.
The European Union and the U.S. have been in a standoff with
Russia over the Kremlin's policy in Ukraine for most of the year,
but ratcheted up sanctions sharply last summer, after the downing
of the Malaysia Airlines passenger flight over Ukraine. Germany's
Chancellor Angela Merkel on Thursday defended her tough stance
against Russia, stressing sanctions remain "unavoidable" as long as
the Kremlin disrespects countries' right for self-determination and
European values.
President Barack Obama on Thursday signed a new package of
Russia sanctions into law but won't put them in place, he said in a
written statement.
The EU toughened its trade, investment and business sanctions on
Crimea-based companies on Thursday, introducing a range of new
measures from a ban on EU cruise ships visiting local ports to a
ban on sales of energy and telecommunications technology.
Mr. Putin remained defiant on Ukraine, but avoided provocative
language such as "junta," a term he once used for the current
government in Kiev, and "Novorossiya," a putative geographic entity
encompassing large parts of eastern and southern Ukraine that
Russian nationalists have used to suggest Moscow should annex
larger parts of Ukraine.
He credited Ukrainian President Petro Poroshenko with seeking a
solution to the crisis but suggested other more hawkish politicians
in Kiev could spoil matters. Asked about the pro-Russian separatist
regions in eastern Ukraine that have been fighting against Kiev's
forces for months, Mr. Putin accused Ukraine's government of
imposing an economic blockade on the regions and called for a
political dialogue.
In tough language, Mr. Putin returned to an analogy he'd used
earlier this fall, comparing Russia to a bear in the Siberian Taiga
wilderness, saying it was naive to hope that the West would leave
Russia alone.
"They will always try to put it in chains and once they have it
in chains, they will take out its teeth and claws, which in this
case means our strategic nuclear deterrent," he said. "Once they've
got the Taiga, they won't need the bear," he said, accusing Western
leaders of saying publicly that Russia should be deprived of its
vast natural resources.
Asked by a young female reporter from the provincial city of
Voronezh about the personal life of "the country's most eligible
bachelor"--clearly referring to Mr. Putin, who was divorced last
year--Mr. Putin responded that "everything is in order, don't
worry."
Write to Alexander Kolyandr at Alexander.Kolyandr@wsj.com and
James Marson at james.marson@wsj.com