The EU and United States have imposed visa bans and asset freezes on some Russian individuals, and are contemplating wider sanctions as international tensions persist over eastern Ukraine.
Ulyukayev told parliament national output fell 0.5 percent compared with the last quarter of 2013, although it grew by 0.8 percent year-on-year in the first quarter.
He said the downturn reflected "a substantial reduction in capital investment'', which fell by 4.8 pct in the first quarter compared with a year earlier.
Consumption was stronger, with retail sales growing by 3.2 percent in the first quarter. However, the minister cautioned that may not be sustained because it reflects one-off public sector pay increases.
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Ulyukayev said Russia should spend a bigger share of its $87 billion National Welfare Fund on domestic infrastructure projects, rather than investing in western securities, because of geopolitical risks.