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Finland to seek compensation if Russia sanctions hit economy

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Finland to seek compensation if Russia sanctions hit economy

Alexander Stubb - Photo EU Council

(ESPOO) - Finland will seek compensation from the EU if last week's sanctions on Russia lead to an economic crisis in the country, Finnish Prime Minister Alexander Stubb said on Wednesday.

"It is without doubt clear that, if sanctions hit Finland disproportionately, we will seek support from our European partners," Stubb said at a press conference.

"We have to stick to the principle of economic solidarity. In practice, this means that those member states most affected by the sanctions should also receive some form of compensation."

Stubb did not specify what type of compensation he would demand.

Finland struggled with recession in 2012 and 2013 and is already feeling the effects of weaker trade with neighbouring Russia since the beginning of the Ukrainian conflict.

The Bank of Finland estimates a three-percent fall in the Russian economy would shrink Finland's output by 0.5 percent.

"I dare say that there is a potential risk of -- and I stress that it is potential -- an economic crisis 2.0," Stubb said.

"The indirect impacts of the sanctions can be significant."

Finland's government presented its annual budget on Wednesday, adapted to take account of the possible effect of a weaker Russian economy.

The budget focuses on boosting growth, with measures such as reduced taxes for lower income groups to increase domestic demand.

"Recovery is in the air, but there are a lot of risks which cast a shadow on Finland's economic situation," Rinne said.

"Ukraine is the main risk."

The European Union announced broad economic sanctions against Russia last week, including limiting access for Russian state-owned banks to Europe's financial markets, a ban on arms sales and curbing trade in sensitive technologies that will hit Russia's key oil sector.

On Wednesday, Russian President Vladimir Putin retaliated with an executive decree banning or limiting food and agricultural product imports for a year from nations that have imposed the sanctions.

Russia has already halted some food imports from a range of European countries and has threatened to limit the amount of chicken products it buys from the United States.

The steps announced by the Kremlin also forbid companies in Europe and the US from striking future deals in Russia's vital oil and arms sectors.

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