WASHINGTON – The United States and its allies are pushing ahead with sanctions aimed at forcing Vladimir Putin to spend Russia's money propping up its economy rather than sustaining its “war machine” for the fight in Ukraine, a top Treasury Department official said Tuesday.
Deputy Treasury Secretary Wally Adeyemo, one of the main U.S. coordinators on the Russian sanctions strategy, said in an interview with The Associated Press that the goal is to make Russia “less able to project power in the future.”
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On the same day that inflation notched its steepest increase in decades, Adeyemo said reducing supply chain backlogs and managing the pandemic are key to bringing down soaring prices that he related to the ongoing land war in Ukraine, which has contributed to rising energy costs.
“Let’s be clear that the increase in energy prices was caused by President Putin’s invasion, and we’re going to continue to see volatility in those markets as long as President Putin continues his illegitimate invasion of Ukraine,” he said. He added that the Biden administration was “committed to doing everything we can to lower the cost of energy for the American people."
As Treasury Secretary Janet Yellen's No. 2, Adeyemo is tasked with developing a sanctions strategy that many economists have equated to economic warfare with Russia. He's also leading Treasury's efforts to rebuild the American economy from the pandemic with equity at the fore.
Adeyemo discussed the next steps the U.S. and its allies will take to inflict financial pain on Russia — and the complications the war has on rising costs to Americans back home.
The U.S. and its allies will next target the supply chains that contribute to the construction of Russia's war machine, Adeyemo said, which includes “everything from looking at ways to go after the military devices that have been built to use not only in Ukraine, but to project power elsewhere.”
“What that means practically is that with less money, Russia will have less money to invest in their military," he said.
Adeyemo said Putin recently admitted that the Russian economy was going to have to transform. Adeyemo interpreted that to mean that “the Russian economy is less flexible, it's smaller, it’s less able to project power into the future.”
Adeyemo's work includes coordinating with U.S. allies to develop thousands of unprecedented sanctions on Russia's leadership and its Central Bank, which is intended to cripple the country’s financial system.
Germany in particular faces international pressure to curb its business ties with Russia, which provides the European superpower with natural gas.
“Our German counterparts and my European counterparts in general are working as hard as possible to make plans to get off of Russian energy as quickly as possible, including last week’s announcement that they were going to ban Russian coal in the near term,” Adeyemo said. “And our expectation is that they’re going to take these steps.”
In the U.S., the economy has proven to be a struggle for the Biden administration as the strong job gains of the past year have also yielded the worst inflation in more than four decades.
The Labor Department reported Tuesday that prices in March climbed 8.5% from a year ago, the steepest increase since December 1981. While inflation began to increase before Russia invaded the Ukraine, the war has strained supplies of oil and gasoline. Half of the past month’s increase in consumer prices came from gas.
This economic volatility is a challenge to other work that Adeyemo is tasked with for Treasury — leading an equitable pandemic-related economic recovery through Treasury's Office of Recovery Programs, which marks its one year anniversary this week.
Adeyemo said he had recently visited Memphis to see how the city was using American Rescue Plan dollars to help people pay their rent. Overall, he said, "we’ve seen 80% applied towards low income households, 40% to African American households and 20% to Latinx households."
He said it was imperative that remaining relief money under the program be used to help small businesses, including through the State Small Business Credit Initiative, which allows states to increase access to credit for small businesses.
“Lots of communities are thinking through ways to not only use the money to address the immediate crisis, but how they build their communities better into the future in order to make sure that people have economic opportunity,” he said.
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Associated Press writer Josh Boak contributed to this report.