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Putin tells Govt: Retaliate against West

Tuesday, August 05 16:46:04

Russian President Vladimir Putin has ordered his government to prepare retaliatory measures against the latest round of Western sanctions, Russian news agencies reported today.

"Of course, it should be done carefully in order to support domestic producers and not hamper consumers," he was quoted as saying.

"The Russian government has already proposed a number of response measures to so-called sanctions imposed by certain countries," Mr Putin said.

"I think that in current conditions, in order to ensure the interests of our producers, we could very well think about this now."

Russia's new tax on sales, backed by President Vladimir Putin, illustrates growing economic strains from Western sanctions over Ukraine - and the lack of easy solutions.

Under the tax plan, regional governments will have the option from next year to introduce a 3 percent tax on sales to cover their budget shortfalls.

Analysts say such hikes will boost already stubbornly high inflation, increase the burden on business and add to the restraints on economic growth. Yet Russia needs to plug the tax holes left by a slowing economy.

Economists polled by Reuters project that Russia's economy will grow by a feeble 0.3 percent this year.

If Russia introduces the sales tax, "business sentiment will remain depressed and will probably decline further - which is clearly not the best recipe for a recovery in investment", said Vladimir Kolychev, chief economist at VTB Capital in Moscow.

"Secondly, (the tax) will certainly put a dent into consumer budgets and will continue to restrain consumption into next year via higher inflation."