President Vladimir Putin on Thursday accused the West of exploiting the Ukraine crisis to undermine a growingly confident Russia, and said Crimea was "sacred" to Moscow.

President Vladimir Putin on Thursday accused the West of exploiting the Ukraine crisis to undermine a growingly confident Russia, and said Crimea was "sacred" to Moscow.

In his annual state-of-the-nation address, Putin said Russia was justified in its stance on Ukraine but that Moscow would not sever ties with the West despite confrontation with Brussels and Washington.

"Under no circumstances are we going to scale back our ties with Europe, America," he said despite several rounds of sanctions this year.

But in the same breath he accused Russia's enemies of seeking to force the "collapse and dismemberment" of Russia as happened in the former Yugoslavia.

The speech delivered in an ornate Kremlin hall to hundreds of dignitaries, lawmakers and officials offered few signs that the Russian strongman was about to budge under pressure from the West.

The West "would have thought up some other excuse to contain Russia's growing possibilities", failing the tension over Crimea and Ukraine, Putin said.

"Every time someone believes Russia has become too strong, independent, these instruments get applied immediately," he added, referring to sanctions.

"We are ready to take upon any challenge and win," said Putin, who still enjoys sky-high ratings triggered by the March seizure of Crimea from Ukraine.

But in a sign that authorities are girding for a protracted political battle with the West, he said Russia over the next few years must begin replacing imported foods and medicines.