* Putin says sanctions hurting, but not critically
* Western oil majors sticking with Russia projects
* If foreign firms quit, others will take their place -
(Updates with Putin, adds quotes, background)
By Nigel Stephenson
MOSCOW, April 24 President Vladimir Putin said
on Thursday that Ukraine-related sanctions were hurting Russia
while one of his ministers said foreign oil and gas companies
that quit the country would not be able to return soon.
Putin went further than he had before in acknowledging the
impact on the economy of U.S. and European sanctions imposed
over Russia's annexation of Ukraine's Crimea peninsula, although
he said the damage was not very serious.
"Overall they are causing (damage), because (credit) ratings
are being reviewed, loans could become more expensive and so
forth. But this is of no critical character," he said in a
televised meeting with regional media in St Petersburg.
The United States and the European Union have imposed visa
bans and asset freezes on a few Russian individuals but have
warned that harsher sanctions, affecting key sectors of the
economy could be imposed in days unless Russia implements an
agreement intended to defuse the Ukraine crisis.
Putin condemned the use of sanctions as a tool of foreign
policy, saying they hurt everyone involved.
However, he warned of consequences for Ukraine if Kiev used
force in eastern Ukraine.
Earlier, Natural Resources Minister Sergei Donskoy said
foreign firms that withdrew from Russia, the world's top crude
oil producer, would pay a price.
"It is obvious that they won't return in the near future if
they sever investment agreements with us, I mean there are
consequences as well," he told reporters in the city of
Birobidzhan in Russia's Far East.
"Russia is one of the most promising countries in terms of
hydrocarbons production. If some contracts are severed here,
then, colleagues, you loose a serious lump of your future pie."
Russia's economy is highly dependent on oil and gas and the
industry, in turn, depends on foreign investment and technology.
Capital outflows from Russia have surged as international
tensions have worsened and investors have moved their money out.
Central bank data released earlier this month showed an
estimated $63.7 billion in net capital outflows in the first
three months of the year, the same as for the whole of 2013. The
World Bank has said this year's total could reach $150 billion.
The surge coincides with slides in investment and in
business confidence as forecasters cut growth forecasts.
The economy shrank by 0.5 percent in the first quarter of
2014, compared with the previous three months, though it grew
0.8 percent year-on-year, the economy minister said this month.
The rouble is down about 8 percent against the dollar
The central bank meets on Friday but is unlikely to offer
any immediate help to the economy.
It unexpectedly raised interest rates by 150 basis points to
7 percent in early March following sharp falls in Russian assets
over Ukraine tensions. However, Governor Elvira Nabiullina has
said the bank does not plan to cut its key lending rate until
its June meeting at the earliest.
STICKING WITH RUSSIA
Donskoy said foreign firms had not yet signalled they would
quit Russia and that Western oil majors BP and Royal
Dutch Shell were sticking with their projects.
BP owns a 19.75 percent stake in Kremlin-controlled energy
giant Rosneft. It accounts for about a third of BP's
oil output and has lost about $1 billion in value since early
Chief Executive Bob Dudley visited Moscow earlier this month
and said the company was "rock solid" with its Rosneft
investment and that it was "business as usual".
A few days later, Shell Chief Executive Ben van Beurden also
came to Moscow and told Putin the company was committed to
expansion in Russia.
Shell already has an oil-producing project with Gazprom Neft
, Gazprom's oil arm, and has started to tap
hard-to-recover oil in Russia. He confirmed that Shell had
agreed with Gazprom to expand the Sakhalin-2 liquefied natural
gas plant which produces 10 million tonnes of LNG per year.
Russia has signed deals with other international majors
including ExxonMobil, Eni and Statoil,
mainly relating to projects in the Arctic.
Gazprom, with more than 15 percent of global gas
production and reserves, is expected to sign a deal next month
to begin exporting gas to China from 2018.
Such a deal would mark the end of a decade of talks and some
analysts say the pace has picked up partly in response to
concerns that the threat of sanctions is spurring Europe to
reduce its dependence on Russian energy.
(Reporting by Denis Dyomkin and Alexei Anishchuk, writing by
Nigel Stephenson; editing by Anna Willard)