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Russia faces deep recession that will 'only get deeper,' Treasury official says

New York (CNN Business)Sanctions leveled on Russia have pushed the country toward becoming a closed economy, a status the country is ill-equipped to handle, a senior Treasury official said on Friday.
"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 told reporters during a conference call.
Among other steps, Western powers have frozen about half of Russia's foreign reserves, banned certain Russian banks from the high security SWIFT banking network and blocked exports of key technology to Russia. The United States has also prohibited the import of Russian oil, natural gas and petroleum products.
The goal of the sanctions is to debilitate Russia's economy to the point that it weakens the country's ability to use its military, the senior Treasury official said.
"Russia has been backed into a corner to becoming a closed economy, and Russia is in fact one of the most ill equipped countries to do well as a closed economy," the senior Treasury official said.
The official predicted Russia will have a lot of trouble being isolated on the world stage because it has long relied on the sale of raw materials to buy consumer goods and sophisticated equipment for production.
Of course, there are risks that sanctions worsen the supply chain crisis that has sent inflation in the United States to levels unseen in 40 years.
US officials are keeping an eye on US and European supply chains, including the supply of key metals and minerals required in critical manufacturing processes, the senior Treasury official said.
Likewise, Western powers have granted humanitarian exceptions designed to limit the impact on food prices, which were already high before this crisis began.
The senior Treasury official left the door open to further tightening sanctions against Russia if these supply disruptions are minimized.
Western powers have also granted a license that allowed Russia to make $117 million in interest payments on its debt last month, avoiding a widely feared default.
The goal of that license is to mitigate the impact that a default would have on Western banks, bondholders and other creditors, the senior Treasury official said.
The license expires on May 25 and the senior Treasury official said a decision has not been made on whether or not to extend it.

Apr 3, 2022 11:42
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