Vladimir Putin has admitted for the first time that he is prepared for his country to face a “catastrophic” slump in oil prices, as David Cameron said Europe would have no choice but to step up sanctions if the Russian president did not abide by previous agreements to respect Ukraine’s independence.

Putin was speaking before a bilateral meeting with Cameron on the margins of the G20 summit in Brisbane. The meeting is likely to be a bruising affair, especially after the British prime minister likened Russia to Nazi Germany, saying Europe had learned lessons from history about how a big country could bully others. Sideline talks between EU leaders and Barack Obama over the Ukraine crisis have also been scheduled.



Putin said Russia’s economy had the reserves to withstand a collapse in oil revenues, but added: “We are considering all the scenarios including the so-called catastrophic fall of prices for energy resources, which is entirely possible and we admit it.”

He said he regarded sanctions as pointless, illegal and likely to harm not just Russian but world trade. “This contradicts international law because sanctions can only be imposed within the framework of the United Nations and its security council.”

He claimed that as many as 300,000 German jobs could be at risk if there were no contracts with Russia. Putin is also due to see Angela Merkel at the summit.

The Russian economy is forecast by its central bank to run zero growth next year, and the value of the rouble has fallen. Russia gets half its total budget revenue from oil and natural gas taxes.

British government sources are increasingly confident that sanctions limiting the ability of Russian banks to raise capital are taking their toll. Britain has been urging the Russians to stand by a ceasefire agreement signed in Minsk in September and to stop sending Russian material and arms across the border to rebel-held regions of Ukraine.

Cameron told reporters: “It’s possible to stand by the Minsk agreement. It’s not a perfect agreement from anyone’s point of view, but it has some key parts to it, about Russian troops and about borders and about respecting Ukraine’s sovereignty. I think there’s a very clear choice for Russia of which path it takes. If it takes the Minsk path we could progressively see normalisation of relations between Russia and Ukraine, you could see Ukraine’s sovereignty and elections respected, you could see the removal of sanctions if that were to happen.

“But the other path of not respecting the Minsk agreement, continuing to undermine Ukrainian sovereignty, continuing to see Russian troops in Ukraine and Russian tanks and the rest of it – I don’t think Europe would have a choice but to maintain the sanctions we have, to start looking at further measures that could be taken if Russia takes further steps, and to putting relationships between European countries and Russia on a very different basis.”

Earlier, Cameron said: “We have to be clear what we are dealing with here is a large state bullying a smaller state. We have seen the consequences of that in the past and we should learn the lessons of history and make sure we do not let it happen again. I don’t think there is a military solution to this, but the sanctions have had some effect. You can see that in what has happened to the Russian rouble, what has happened to the Russian stock market and the difficulty the Russian banks have in gaining finance.”

What’s the point of the G20, anyway? Find out with our animation Guardian

The Australian prime minister and G20 host, Tony Abbott, has been at the forefront of the criticism of Putin. It is thought that 38 Australians were among the 298 people killed on flight MH17, the civilian plane shot down over Ukraine in July. Such is the anger in Australia that there were protests against Putin outside his hotel in Brisbane.

Australia sent three ships to its northern coast after a flotilla of Russian navy vessels appeared there this week.

Abbott said: “It is our clear understanding on the evidence so far this plane was clearly shot down by Russian-backed rebels most likely using Russian-supplied equipment. I think there is heavy responsibility on Russia to come clean and to atone.

“It is part of a regrettable pattern, whether it is the bullying of Ukraine, the increasing number of Russian military aircraft flying into the airspace of Japan, European countries or the task group in the South Pacific. Russia would be so much more attractive if it was aspiring to be a superpower for peace and freedom and prosperity, if it were trying to be a superpower for ideas and values, instead of trying to recreate the lost glories of tsarism or the old Soviet Union.”

The two summits in Brisbane ending on Sunday had originally been intended by Australia to focus on job creation, improved growth and unblocking barriers to trade deals between the US and EU.

The issue of climate change given a new momentum by the China-US deal is also likely to feature as Australia battle to keep the agenda manageable.

But the Australians are also keen to pick up initiatives to clamp down on corporate tax avoidance by shaking up a creaking international tax system that is unfit to tackle multinationals capable of shifting profits to low-tax jurisdictions.

Cameron made tax transparency a big theme of the British G8 presidency last year and said on Friday that 90 countries had now agreed to cooperate on sharing tax information in line with guidelines set out by the OECD, the international body charged with modernising the international tax system.

He added he “damn well expected” companies to pay corporation tax in full in the UK adding the conversation and culture was changing in boardrooms worldwide as executives realised they had to run defensible policies on paying tax.

Cameron believes the culture change is being driven by popular anger directed at companies caught avoiding taxes, but also by unprecedented levels of cooperation between tax jurisdictions threatening to expose the way company accountants try to transfer profits to low-tax jurisdictions.

But Cameron held off from directly criticising the new European commission president, Jean-Claude Juncker, over claims that he had for decades overseen a regime as Luxembourg prime minister designed to lure companies to base operations in the low-tax country.

Cameron has tried to block Juncker’s appointment as Commission President in the summer, largely due to his federalist views, but faced by other battles on the European stage Cameron refused to directly join the call for Juncker to quit after it had been shown he had designed an effective tax haven in Luxembourg in the centre of Europe.

Cameron may feel as he prepares for potential renegotiations over Britain’s relationship with the EU that he cannot afford to confront Juncker, preferring instead to stress the moral case for companies to pay tax .

The Juncker assault had been given new impetus by a leak of a mass of documents showing the scale of the tax avoidance practised in Luxembourg at a time when Juncker had been prime minister.

Cameron said: “We have a very strong moral case to make now. When you have a 20% corporation tax rate, we damn well expect you to pay it. The culture is changing across the boardrooms round the world – they are having a lot of discussions about whether their strategy over tax is responsible and defensible.”