Russia's economic crisis is an "extremely grave" situation not only for the country itself, but for the rest of the European Union, the former president of the European Central Bank (ECB) told CNBC.

"(The situation in Russia) is certainly something which is extremely grave," Jean-Claude Trichet told CNBC. "Not only because we have geopolitical risks associated with what has happened in Ukraine and what is still happening. But also because what have now the price of oil which is going down very strongly."

The fallout from Russia's problems – which include the vertiginous fall of the ruble and MICEX stock index as a result of a declining oil price and sanctions from the West -- was not confined to the country, Trichet warned.

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The Russian currency has declined around 50 percent against the dollar since sanctions were first placed on Russia for its intervention in Ukraine. The Russian central bank has made several interventions in an attempt to prop up the currency, making its most dramatic move yet this week when it hiked its key interest rate to 17 percent.

The "freefall" of the ruble reflected the "weaker position of Russia," Trichet said, adding that he wasn't sure that "the handling of the situation has been absolutely optimal from an operational standpoint" by the central bank -- a criticism echoed also by President Vladimir Putin in his annual press conference Thursday.

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Trichet warned that it was very important for the European Union to try to find a solution to the Ukraine crisis and that it was threatened by the Russian economic crisis, given its close proximity and economic interdependence.

"It is one of the problems we have to cope with in the European Union (and) I hope very much that we will find out ways… as rapidly as possible to stabilize the situation. Both I would say from the geopolitical standpoint, from the sanctions standpoint…it seems to me very, very important."