A senior US Treasury official on Friday said that punishing sanctions imposed by the United States and its allies on Moscow for invading Ukraine are pushing Russia into recession and starting to turn it back into a closed economy.
The official, speaking on condition of anonymity, told Reuters that the Treasury sees Russia as struggling with steep inflation, diminished exports and shortages despite a recovery of its rouble against the dollar.
Inflation that has run as high as 6% over the past three weeks is a better indication of the sanctions’ performance inside Russia, revealing the rouble’s diminished purchasing power, the official said, adding that black market rouble exchange rates were well below the international rate.
As Western democracies impose initial sanctions immobilising around half of the Russian central bank’s $630 billion in foreign exchange assets and cutting several key Russian banks off from the SWIFT international transaction network, the rouble lost half its value against the dollar.
It has since recouped its pre-invasion value, touching a five-week high in early Moscow trade on Friday before settling in the 83-84 range to the dollar.
But the Treasury official said that will not stop a steep contraction in Russia’s economic output that outside analysts now forecast at about 10% this year — far worse than the 2.7% contraction it suffered during 2020.
“The economic consequences Russia is facing are severe: high inflation that will only get higher, and deep recession that will only get deeper,” the official said.