The Plastov award celebrates figurative or realist art in the spirit of Plastov's realist socialist paintings. Plastov, who died in 1972, was best known for his depictions of Russian rural life. He was named people's artist of the USSR and was laureate of the Stalin prize in 1946.
According to British artist Ken Howard, who is on the jury panel for 2013, the award will celebrate a style that has been neglected in favour of abstract or conceptual art.
The award was launched in 2007 but this is the first time the value of the prize is so high. This is also the first year it is open to international figurative artists.
The culture minister Vladimir Medinsky says he would like the award to become the equivalent of a Nobel Prize for art.
Applications start in May and the award ceremony will be held in September.
The Russian ambassador to Britain, Alexander Yakovenko, was also present at the launch; he said that this was a prelude to a year of closer cultural collaboration between Britain and Russia.
The exhibition runs until February the 5th at MacDougalls' auction house in London.