Moscow (AFP) - President Vladimir Putin said Russia is still open for business with Western companies despite sanctions as he ceremonially launched a joint US-Russian oil exploration project in the Arctic.

"Despite the difficulties of today's political context, pragmatism and common sense prevail, and that is very satisfying," Putin said as state-owned Rosneft and US oil giant ExxonMobil began exploring for oil in the Kara Sea off the northern coast of Siberia.

"We welcome of course and we are open for expanding our cooperation with our partners," Putin was said in a video link to the West Alpha oil rig, Russian news agencies reported.

He was speaking just days after he ordered a ban on most food imports from the European Union and United States in response to Western sanctions over Ukraine that target several sectors of the Russian economy including its critical oil industry.

"Businesses, including major domestic and foreign firms, understand very well the necessity of cooperation," Putin said.

Russian analysts have said Putin needed to respond to Western sanctions for domestic reasons, while Moscow had expressed hope for a resolution of the Ukraine impasse.

The Western sanctions imposed for Russia's annexation of Crimea and alleged support for rebels in eastern Ukraine target Arctic oil projects in particular, which require Western cooperation and equipment to develop new wells as production from existing fields declines.

Government officials have said the existing project, Russia's northernmost attempt to find oil, does not fall under the sanctions.

"ExxonMobil is an old partner and we value our relationship," Putin said.

Rosneft chief Igor Sechin said he hopes the Kara Sea will end up rivalling Alaska's north slope and even Saudi Arabia.

Sechin has said the Kara Sea could hold some 100 billion barrels of oil, Russian news agency ITAR-TASS reported.

Exploratory drilling is expected to continue until the end of October when the sea freezes up.

According to ExxonMobil, the conventional well will be in a water depth of roughly 80 metres (200 feet) and be sunk to approximately 2,350 metres.