President Vladimir Putin has delivered his annual state of the nation address to parliament.

Speaking to both chambers in the Kremlin, Vladimir Putin condemned Western governments for seeking to raise a new iron curtain around Russia.

Western sanctions, in response to Russia’s role in eastern Ukraine, and falling oil prices have hit hard.

The government has warned that Russia will fall into recession next year.

In an attempt to kick-start the economy he proposed a “full amnesty” for capital to return to Russia. Capital flight is estimated at more than $100 billion this year.

He also proposed a four-year freeze on tax rates.

On Decemebr 1, the rouble suffered its biggest one-day fall since 1998.

The currency slid almost 9% against the dollar before rallying after suspected central bank intervention.

From the outset of his speech, in front of an audience of 1,100 people, Vladimir Putin defended Russia’s annexation of Crimea in March, saying that the Ukrainian peninsula’s residents were “our people”.

He insisted that the “tragedy” in Ukraine’s south-east had proved that Russian policy had been right, but said Russia would respect its neighbor as a brotherly country.

Condemning the “pure cynicism” of the West, Vladimir Putin complained that even if Crimea had not been annexed, the West would have come up with a different pretext to impose sanctions to contain Russia’s resurgence.

Then he began to accuse Western governments of trying to raise a new iron curtain around Russia. While he asserted that Russia would not enter an “expensive arms race”, it would provide its own security so that nobody would gain military domination. Russia had enough “power, will and courage” to protect itself, he added.

Moving on to the economy, Vladimir Putin pledged that Russia would be open to the world – to foreign investment and joint projects. But he warned that it faced a “hard time ahead: much depends on each of us at our workplace”. Western sanctions should be seen as a stimulus, he argued.

Western sanctions over Russia’s annexation of Crimea and its role in destabilizing eastern Ukraine are contributing to the country’s economic problems.

The estimated cost of sanctions and falling oil prices to Russia is $140 billion a year, according to Russian Finance Minister Anton Siluanov.

Over the last year the rouble has lost around 40% of its value against the dollar and inflation is expected to reach 10% early next year.

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