4 December 2014
Last updated at 10:58
President Putin said Russia must release its full potential in response to Western sanctions
President Vladimir Putin has warned Russians of hard times and urged self-reliance, in his annual state of the nation address to parliament.
Speaking to both chambers in the Kremlin, Mr Putin accused Western governments of seeking to raise a new iron curtain around Russia.
Russia has been hard-hit by falling oil prices and by Western sanctions imposed over its role in eastern Ukraine.
The government has warned that Russia will fall into recession next year.
Mr Putin accused foreign “enemies” of having supported the “Yugoslav scenario” for Russia, which would mean disintegration at the hands of separatists, but “we did not let it happen”.
He expressed no regrets for annexing Ukraine’s Crimea peninsula, saying the territory had a “sacred meaning” for Russia dating back to the early spread of Christianity.
The BBC’s Sarah Rainsford in Moscow writes:
The final draft of Vladimir Putin’s annual speech is written by the president himself. It is his view of the state of the Russian nation and highlights his priorities for the year ahead.
So it is telling that Mr Putin chose to stress his unwavering, hard line on the crisis in Ukraine: what happened in Kiev was an “illegal coup” and Crimea, which Russia annexed, was like “holy land” for Russia and would always be treated that way.
Mr Putin went on to accuse the West of meddling in Russia’s internal affairs, claiming that sanctions were merely an excuse to “contain” the country as it grew stronger and more independent.
Earlier this year, such talk worked well, fuelling a surge in patriotism. But Russians are starting to feel the economic consequences of their president’s foreign policy, through sanctions. For those who worry, there was little suggestion from this speech that things would improve soon.
Mr Putin spoke in ornate surroundings in a palatial Kremlin hall
Mr Putin outlined measures aimed at stimulating Russia’s ailing economy.
He proposed a “full amnesty” for capital to return to Russia. Capital flight is estimated at more than $100bn (£64bn; €81bn) this year.
Repatriating capital to Russia legally would mean “there will be no questions from the tax and law enforcement bodies”, Mr Putin promised.
“Everybody who wants to should have the right to come back to Russia. We have to turn this offshore page of our economy. I believe that after the Cyprus events our business will understand that its interests abroad are not valued and the best guarantee for them is national jurisdiction.”
Cyprus became a major offshore centre for Russian businesses in the 1990s, but the emergency bailout of Cypriot banks in 2013 meant big losses for some of them.
Mr Putin also proposed a four-year freeze on tax rates, to help Russian businesses.
On Monday, the rouble suffered its biggest one-day fall since 1998.
The currency slid almost 9% against the dollar before rallying after suspected central bank intervention.
Mr Putin called for “tough co-ordinated actions” by the Russian Central Bank and government “to quell the desire of so-called speculators to profit from changes in the Russian currency’s rate”.
In order to release funding for important projects, Mr Putin said, the state’s National Welfare Fund would lend money on favourable terms to Russia’s major banks. It is one of two big sovereign wealth funds created mainly out of revenue from energy sales.
From the outset of his speech, in front of an audience of 1,100 people, Mr Putin defended Russia’s annexation of Crimea in March, saying that the Ukrainian peninsula’s residents were “our people”.
He insisted that the “tragedy” in Ukraine’s south-east had proved that Russian policy had been right, but said Russia would respect its neighbour as a brotherly country.
Mr Putin’s response to Russia’s economic woes was a focus of attention for the media
Condemning the “pure cynicism” of the West, he complained that even if Crimea had not been annexed, the West would have come up with a different pretext to impose sanctions to contain Russia’s resurgence.
Then he began to accuse Western governments of trying to raise a new iron curtain around Russia.
While he asserted that Russia would not enter an “expensive arms race”, it would provide its own security, including with “unconventional means”, so that nobody would gain military domination. Russia had enough “power, will and courage” to protect itself, he added.
Moving on to the economy, Mr Putin pledged that Russia would be open to the world – to foreign investment and joint projects. But he warned that it faced a “hard time ahead: much depends on each of us at our workplace”. Western sanctions should be seen as a stimulus, he argued.
“We have a huge internal market and resources… capable, intelligent people,” he said. The key was to give people the chance to flourish.
Underlining the message of self-reliance, Mr Putin said “our people have demonstrated national strength, patriotism – and the difficulties we are facing create new opportunities”. “We are prepared to take any challenge of the time and win,” he said.
Russia’s economy is on the brink of recession
Falling oil prices have affected Russia because of the country’s reliance on energy exports, the BBC’s Steve Rosenberg reports from Moscow.
And Western sanctions over Russia’s annexation of Crimea and its role in destabilising eastern Ukraine are contributing to the country’s economic problems.
The estimated cost of sanctions and falling oil prices to Russia is $140bn a year, according to Russian Finance Minister Anton Siluanov.
Over the last year the rouble has lost around 40% of its value against the dollar and inflation is expected to reach 10% early next year.
However, President Putin remains popular, our correspondent adds. According to one opinion poll this week, 72% of Russians approve of the way he is running the country.