Prime Minister Stephen Harper says Russia's economy is "one dimensional" and extremely vulnerable to sanctions because of its reliance on natural gas exports, adding that Russian President Vladimir Putin is a throwback to the Cold War who is out of touch with his younger citizens over how he's handled the seizure of Crimea.

The prime minister used an address to a Munich business audience to point out where he thinks Russia is politically and economically weak as Moscow faces the prospect of punitive sanctions from the West if it escalates the crisis.

A big concern for Europe is that a war of sanctions and counter-sanctions over Crimea could lead to Russia disrupting natural gas exports to European countries, who are extremely reliant on this energy.

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Mr. Harper pointed out, however, that a drop-off in gas sales to Europe would be devastating for Russia, where the government treasury depends heavily on petroleum revenue.

"It's a double-edged sword. Obviously, Europe is extremely dependent on the energy supplies but on the other hand Russia is extremely dependent on the energy revenue and for all intents and purposes it's a one-dimensional economy in that regard," the prime minister told a German business audience.

Mr. Harper didn't make a strong pitch for Europe to buy Canadian energy as an alternative to Russia.

But he talked up projects in Canada that will export liquefied natural gas beyond North America, saying Canada is eager to become a big overseas exporter of fossil fuels. "We're overwhelmingly dependent on the Canadian market and American market [for sales] and we're looking to take that business global."

And the prime minister expressed polite skepticism at Germany's decision to turn overwhelmingly to renewable energy while reducing reliance on fossil fuels and phasing out nuclear energy.

"I do have to say in Germany you've been working to lessen dependence on fossil fuels. You're now committed to phasing out nuclear energy.… and as I understand it, hydro [power] is relatively small here. I do not know an economy in the world that does not rely heavily on at least one of those so this is a brave new world you're attempting," Mr. Harper told a German journalist, Daniel Goffart, who was asking him questions in front of a business audience.

"We wish you well with it."

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Mr. Harper said critics have accused the West of treating the crisis over Crimea as if it's an extension of the now-concluded Cold War between the United States and the Soviet Union in the decades following the Second World War.

He denied he sees the conflict with Moscow in these terms, but said he believes Mr. Putin does and predicted this is creating a rift in Russia.

"It's increasingly apparent to me that the Cold War has never left Vladimir Putin's mind," the prime minister said.

"I think he still thinks in these terms. I think underlying his invasion of Crimea and his threats to Ukraine is unfortunately that kind of thinking."

The prime minister said he thinks many Russians, especially younger ones, disagree with how Mr. Putin is conducting himself in his aggressive seizure of Crimea.

"I don't believe that's where the Russian people are, particularly the younger generations in Russia. I've been in Russia several times and I find the ordinary Russian people, especially the younger people, to be very western in their outlook, their values, their desires," Mr. Harper said.

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"They want the same standards of governance and information flow that the rest of us have. So I think this is a bit of a throwback that over time I hope will be resolved.

The Group of Seven, which has suspended Russia's participation in its G8 coalition of industrial powers, warned this week of coordinated sanctions on sectors of the Russian economy, such as energy, if Moscow escalates the crisis further.

Mr. Harper told a Munich business audience he wants to see sanctions increase against Moscow – and he didn't make this ramp up contingent on Russia grabbing more foreign territory.

"We must pressure the Putin government to change this and we must employ sanctions that if anything will increase over time to keep the pressure on [Moscow] to move away from this kind of a direction in its foreign policy," he said.

"We simply cannot afford the risk of Europe going back to being a continent where people seize territory … where bigger military powers are prepared to invade their neighbours or carve off pieces."

The Prime Minister's Office said Mr. Harper has visited Russia at least three times while prime minister.

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