September 16, 2014 / 6:48 AM / 6 years ago

Russia will struggle to help firms under sanctions - former finance minister

MOSCOW (Reuters) - The Russian government will not be able to support all state companies struggling to raise funds due to Western sanctions because of its large state social spending commitments, former finance minister Alexei Kudrin said on Tuesday.

A strong advocate of liberal reforms and fiscal prudence, Kudrin has become almost the lone voice among the Russian elite to criticise government policy in dealing with the fallout from the Ukraine crisis.

At a foreign business conference, Kudrin said he expected the Russian economy to stagnate this year or weaken further, and that growth would be negative in 2015, well below government forecasts for 0.5 percent in 2014 and 1 percent next year.

With the economy slowing and social spending increasing, the government cannot help those companies which have already lined up with requests for financing after the European Union and United States imposed sanctions to close off external markets.

“Companies turn to the government, but the government’s support is limited, bound by continued large special spending,” Kudrin said.

Several state and private companies have suggested they would need to turn to the government for funds to weather Western sanctions. Russian state oil producer Rosneft (ROSN.MM) has asked for $40 billion (24.73 billion pounds).

Kudrin also said he welcomed the government’s plan to turn eastwards for investment and demand but that it would take 20 years for those new trade relations to develop fully.

He said for as long as there was fighting in eastern Ukraine, Russia would face a tough investment climate.

His words are at odds with government officials, who while criticising Western sanctions, are painting the situation as an opportunity for Russia to develop its home-grown industry and cultivate its ties with its neighbours to the East.

“Turning to the East brings good prospects, especially for Russia’s far east,” Deputy Prime Minister Arkady Dvorkovich told the same conference.

“When it comes to sanctions we consider them meaningless, counterproductive ... measures that do not solve political problems.”

Reporting by Lidia Kelly; writing by Elizabeth Piper, editing by Jason Bush

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