Russia economy would shrink if hit by sectoral sanctions -minister

The Russian economy would contract should the West introduce wide-ranging sectoral sanctions over Ukraine but that would not be a "dramatic" situation, Economy Minister Alexei Ulyukayev was quoted on Saturday as saying.        

The United States and the European Union have repeatedly called on Moscow to do more to help stop fighting in eastern Ukraine - where Kiev is struggling against a separatist pro-Russian rebellion - or face harsher sanctions.          

Ulyukayev told the "Vesti on Saturday with Sergey Brilev" TV programme that the Russian government has worked out an economic outlook scenario envisaging sectoral sanctions.        

They would hit Russian exports from luxury goods like furs and caviar under a relatively lenient option to metals, fertilisers, gas and oil under the harshest one, he said.        

"The economy withstands such a scenario. The pace of economic growth, of course, retires to a negative area. The pace of investment if even worse, revenues are reduced, inflation accelerates, government reserves shrink," Ulyukayev said.          

"But, in general, there is no dramatic development."       

The government's official 2014 growth forecast now stands at 0.5 percent but Ulyukayev has said it could come in at around 1.1 percent - the same as in the first five months of the year.           

The EU, which relies on Russia for a large part of its energy needs and has closer trade ties with Moscow than the Untied States, has been reluctant to press ahead with sectoral sanctions fearing they would backfire.         

Diplomats in Brussels said on Friday any immediate moves  could rather take the form of expanding the existing lists of people and companies targeted with asset freezes over Russia's role in Ukraine, including the annexation of Crimea.  

Also on Saturday, Russia's foreign minister accused the United States of encouraging Ukraine to challenge Moscow.

Speaking in televised remarks, Sergey Lavrov said that "our American colleagues still prefer to push the Ukrainian leadership toward a confrontational path." He added that chances for settling the Ukrainian crisis would have been higher if it only depended on Russia and Europe.

Lavrov spoke after Friday's European Union summit, which decided not to immediately impose new sanctions on Russia for destabilizing eastern Ukraine, but gave the Russian government and pro-Russian insurgents there until Monday to take steps to improve the situation.

Ukraine on Friday signed a free-trade deal forging close ties with Europe, the deal that angered Russia and triggered the bloodshed and political convulsions of the past seven months.