Russia has rowed back on plans to take part in the construction of a canal across Nicaragua, linking the Pacific and Atlantic oceans, saying it needs to reassess current financial conditions before making a final decision.

Russian President Dmitry Medvedev accepted over a year ago his Nicaraguan counterpart's proposal to study the possibilities of participation by Russia's state and private sectors in an enterprise to build a canal through Nicaragua.

However, Sergei Aristov, a Russian deputy transportation minister, gave on Monday a less optimistic remark on the proposal, saying that Russia must first review its foreign financial ambitions in the light of the ongoing global financial crisis.

"Considering the financial situation in the world, as well as the beginning of the Panama Canal reconstruction, the given issue needs additional elaboration taking into account the altered economic conditions," Aristov said at a meeting with Nicaraguan Deputy Foreign Minister Coronel Kautz.

Russia was hit hard by the global economic and financial meltdown, prompting authorities to devalue the national currency, pump liquidity into the banking sector and provide loans to domestic businesses to keep the economy afloat.

With the federal budget deficit expected to hit 6.8% of GDP this year, the Russian government will have to resort to borrowing on world capital markets for the first time in 10 years to bridge budget gaps and maintain macroeconomic stability.

The proposed canal, whose construction is estimated by experts at $18 billion, would be able to accommodate ships larger than those that can pass through the Panama Canal, even after its enlargement.

MOSCOW, January 18 (RIA Novosti)