US Treasury Secretary: "Russia's Inflation Rate to Exceed 20% This Year... Sanctions on Russia Are Effective"

[Image source=AP Yonhap News]

[Asia Economy Reporter Hyunwoo Lee] Janet Yellen, the U.S. Treasury Secretary, stated that the sanctions imposed by the U.S. and the West on Russia have caused a sharp rise in Russian prices and dealt a significant blow to the Russian economy. This appears to be an active explanation in response to calls, mainly from U.S. Republicans, for even stronger sanctions than those currently in place.

On the 10th (local time), Secretary Yellen testified at a hearing of the U.S. Congressional Financial Stability Oversight Council, saying, "Western sanctions are delivering a powerful blow to the Russian economy," and "Russian inflation is expected to reach 20% this year, and the economy will contract by more than 10-15%." She added, "Russian companies targeted by sanctions are realizing that it is impossible to obtain goods and services in the international market," emphasizing, "Russia's major defense contractors are unable to acquire chips and components."

Yellen's remarks are interpreted as an explanation in response to criticisms, mainly from U.S. Republicans, that the current sanctions on Russia are insufficient and that stronger measures are necessary. According to CNN, earlier, Senator Steve Daines of the U.S. Republican Party sent a letter to Secretary Yellen stating, "Stronger sanctions against Russia and Vladimir Putin are needed to quickly end the Ukraine war," and argued, "Sanctioned companies continue to operate, so the punitive effect is lacking. Regulations on banks linked to Putin must be further tightened."

The U.S. Treasury Department also announced that it is considering ending the exemption that has allowed payment of principal and interest on overseas bonds invested in Russia. Secretary Yellen explained, "The Office of Foreign Assets Control (OFAC) under the Treasury Department is reviewing the suspension of the exemption that has allowed receipt of principal and interest payments on overseas bonds invested in Russia," adding, "However, a review of the ripple effects is necessary, and no decision has been made yet."

Previously, under the sanctions against Russia, the U.S. Treasury prohibited transactions between domestic financial institutions and the Russian central bank and treasury but allowed some exceptions so that Russian bondholders could receive interest payments. These exceptions are scheduled to be allowed only until the 25th of this month. It has been pointed out that through this measure, Russia has been able to complete dollar interest payments on overseas bonds and thus avoid default.

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