US official says Russian economy continues to 'deteriorate'

ISTANBUL

US Treasury Deputy Secretary Wally Adeyemo said the Russian economy continues to "deteriorate" through western sanctions on Moscow amid its war against Ukraine.

"One year on, our economic tools are constraining the Kremlin," Adeyemo said Tuesday at the Council on Foreign Relations.

"Our sanctions and export controls --implemented in partnership with the Department of Commerce -- have degraded Russia’s ability to replace more than 9,000 pieces of military equipment lost since the start of the war, forced production shutdowns at key defense facilities and caused shortages of essential components for tanks and aircraft production," he said.

Adeyemo said the US' export controls and sanctions will continue to prevent Russia from accessing the equipment needed to make up for its losses, while the sanctions will make it harder for the Kremlin to use the remaining resources that it can access to pay for the weapons it needs.

"While Russia’s economic data appears to be better than many expected early in the conflict, our actions are forcing the Kremlin to use its limited resources to prop up their economy at a time where they would rather be investing every dollar in their war machine," he said.

While the Russian economy is expected to lose $190 billion in gross domestic product by 2026, compared to before the war, Russia had a budget deficit of $47 billion last year, its second-highest in the post-Soviet era, according to Adeyemo.

The price cap has also been reducing Russia's revenues from energy, as its monthly budget revenues from oil and natural gas last month fell to its lowest since 2020 and are 46% below compared to a year ago, he added.

Adeyemo said the coalition of more than 30 allied nations, which represent over 50% of the global economy, "have more work to do," especially in coordination with the G7 and the EU.