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The Crab nebula and pulsar have been widely used as a calibration source for X-ray instruments. The in-flight effective area calibration of the Reflection Grating Spectrometers (RGS) of XMM-Newton depend upon the availability of reliable calibration sources. We investigate how the absolute effective area calibration of RGS can be obtained using Crab as a standard candle. We have analysed RGS observations of the Crab using different instrument configurations and spatial offsets, and made use of previous determinations of the continuum spectrum of the nebula plus pulsar. Due to the high spectral resolution of the RGS, we resolve the main absorption edges and detect the strong 1s-2p absorption lines of neutral oxygen. We get an excellent fit to the Crab spectrum using this fixed continuum and the absorption spectrum determined by RGS. We get accurate column densities for the neutral atoms of H, N, O, Ne, Mg, and Fe, as well as a clear detection of FeII and firm upper limits for other ions. Our data are in good agreement with earlier optical and UV spectroscopic measurements of some of these ions. We find solar abundances for N and O, while Ne is overabundant by a factor of 1.7 and Fe is underabundant by a factor of 0.8. We confirm that there is less dust in the line of sight compared to the prediction based on the absorption column. Our spectra suggest a more prominent role of ferric iron in the dust compared to ferrous iron. Our high-resolution observations confirm that Crab can be used as an X-ray calibration source. RGS spectra have determined the absorption spectrum towards Crab with unprecedented detail.