* Deputy PM says spending on Crimea will mean breaking
* Shuvalov says in Berlin that Western sanctions won't sway
* EU "will pay more" for energy if it decides not to rely on
(Adds Shuvalov news conference, details and background)
By Stephen Brown and Madeline Chambers
BERLIN, April 10 Russia may change its budget
rules to reflect the addition of Crimea and its population of
about 2 million people, First Deputy Prime Minister Igor
Shuvalov was quoted as saying on Thursday during a visit to
He told a German newspaper that Crimea - the Ukrainian Black
Sea territory annexed by Moscow last month - needed investment
in infrastructure that could not be covered by existing funds.
Boosting Crimea's economy is vital to Russian president
Vladimir Putin's hopes of keeping the support of local people.
"When a country gets 2 million new people ... which need big
investments, this cannot be done by just diverting funds from
existing state programmes," Shuvalov was quoted as telling Die
Welt, adding roads and ports required "serious investments".
Russian budget rules limit government borrowing to 1 percent
of output and link spending to the long-term oil price.
"I think it's right for this rule to be changed for two
million new Russian citizens in Crimea," Shuvalov said. "State
debt is very low in Russia, among the lowest in Europe. I think
under such conditions, we can raise it a little."
Russia has already approved an initial financial aid package
to help Crimea's economy as it consolidates control of the
region, which it said would be financed from the budget reserve.
But the ultimate cost of its action in Crimea, which sparked
the biggest crisis in East-West relations since the Cold War, is
likely to be far higher.
On Tuesday, the Russian government more than halved its
economic growth forecast for 2014. Deputy Economy Minister
Andrei Klepach said then that even a new "base case" scenario of
1.1 percent growth would be unattainable without extra spending,
requiring "modification" of the budget rule.
Russia's finance ministry has vigorously defended the rules
as a way to protect the economy from a possible fall in the oil
price, but pressure is growing to shore up stagnating activity.
At a business conference in Berlin, Shuvalov said "Russia
remains attractive as before for investors" but added defiantly
that ratcheting up sanctions would not sway Putin and would only
unite Russian society behind him.
EU CONSUMERS "WILL PAY MORE"
"The stricter the sanctions become, the more robustly
Russian society will act," said Shuvalov, who held an informal
meeting with German Foreign Minister Frank-Walter Steinmeier
late on Wednesday, on the sidelines of the conference.
The United States and EU have imposed visa bans and asset
freezes on targeted Russians and Ukrainians and say they are
ready, if necessary, to implement a further round of sanctions
aimed at the Russian energy sector, banking and mining.
As a result of the chill in relations, Europe is looking at
ways to reduce its dependence on Russian oil and gas.
Germany is Europe's biggest gas user and Russia's most
important customer, using over 80 bcm of gas a year and meeting
around a third of its demand through imports from Gazprom
, a share that has risen over the past 20 years.
With the EU importing about a third of its gas from Russia
and accounting for three quarters of its gas exports, Shuvalov
acknowledged that "Russia is more dependent on the European
market than Europe is dependent on Russian supplies".
But he told reporters that diversifying away from Russian
energy "will force Europeans to invest in new infrastructure to
buy gas from the United States and other parts of the world".
Chancellor Angela Merkel has expressed an interest in future
imports of U.S. shale gas to diversify the EU's energy sources
if the infrastructure is created..
"You will pay for this more, it will mean the consumers will
pay more, but Russian gas will be consumed by someone else in
other regions of the world," said Shuvalov, adding that Russia
always delivered on time and could not be called unreliable.
(Additional reporting by Anna McIntosh and Gareth Jones;
Editing by Catherine Evans)