President Vladimir Putin acknowledged Monday in an interview with German daily Bild that Western economic sanctions over the Ukraine crisis are affecting Russia.

"Concerning our possibilities on the international financial markets, the sanctions are severely harming Russia," he said in a long interview, calling the EU sanctions "a theatre of the absurd".

Moscow has been hit by US and European sanctions over the conflict between pro-Russian separatists and Ukrainian forces which has claimed more than 9,000 lives since April (LSE: 0N69.L - news) 2014.

In late December, the EU extended its sanctions by six months, arguing that the Minsk peace agreement signed by Moscow has not been fully implemented.

Putin said, however, that "the biggest harm is currently caused by the decline of the prices for energy," according to an English-language transcript published by Bild online.

"We suffer dangerous revenue losses in our export of oil and gas, which we can partly compensate for elsewhere," he said.

"But the whole thing also has a positive side: if you earn so many petrodollars ?- as we once did -? that you can buy anything abroad, this slows down developments in your own country."

Putin said Russia was now "gradually stabilising our economy".

"Last year, the gross domestic product had dropped by 3.8 percent. Inflation is approximately 12.7 percent. The trade balance, however, is still positive.

"For the first time in many years, we are exporting significantly more goods with a high added value, and we have more than $300 billion in gold reserves."

While Russia has since September 30 launched airstrikes in Syria, Putin called on Western countries to collaborate more closely with Moscow in the fight against the Islamic State group.

"Yes, we should cooperate much more closely in fighting terrorism, which is a great challenge," he said.

According to Moscow, the Russian strikes target only jihadist groups, including IS, while the West has accused Russia of also hitting other rebels fighting Syrian President Bashar al-Assad.

Asked about the crisis in Ukraine, caused by Russia's annexation of Crimea in 2014, Putin said that "for me, it is not borders and state territories that matter, but people's fortunes."

"Of course one always has to follow international law. This was also the case in Crimea.

"The Russian population is absolutely clear about the situation. Napoleon once said that justice is the incarnation of God on Earth. I'm telling you: the reunification of Crimea and Russia is just," Putin continued, describing the sanctions against Russia as "foolish".

Ukraine is not the first former Soviet-era satellite to be involved in a conflict with Moscow.

In August 2008, Georgia fought a brief border war with Russia, losing control of the Abkhazia and South Ossetia regions as a result.
Source :AFP