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One year on, our economic tools are constraining Russia. 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-industrial facilities, and caused shortages of essential components for tanks, aircraft, and submarines. Russia is running out of serviceable munitions and has probably lost as much as 50 percent of its supply of tanks. While the U.S. and our allies have provided Ukraine with state-of-the-art military equipment like M1 Abrams tanks, Russia has been forced to turn to mothballed Soviet-era equipment. Going forward, our export controls will continue to prevent Russia from accessing the equipment and parts needed to make up for these losses, and our economic and financial sanctions will make it harder for Putin to use the resources Russia can access to pay for new weapons.
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Spending the country’s savings can hide the damage for now, but our actions are forcing Russia to mortgage its economic future to save face today. Of course, we have more work to do, and we will continue to do more until Russia’s ceases its baseless and illegal invasion. But one year into this conflict, Russia’s economy looks more like Iran’s than a G-20 country. As long as Russia’s invasion of Ukraine continues, we are committed to taking actions that will further erode the Russian economy’s ability to support this war of choice.
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Last year, rather than the forecasted budget surplus, Russia suffered a budget deficit of $47 billion dollars. This was the second highest deficit the country has experienced in the post-Soviet era. Industrial production has declined in Russia for 9 straight months, and we are planning to take further actions to further decimate the Kremlin’s industrial base.
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Under Secretary Yellen’s leadership, we have paired that multilateralism with new tools and approaches to degrade Russia’s economy and war machine. Immobilizing Russia’s central bank reserves and imposing a price cap on its oil were weighty decisions, ones not everyone believed would succeed. But the evidence to date shows these approaches are working. Take the price cap, which operates by setting a ceiling on how much Russia can charge for its crude and refined oil products if they are traded using a service provider from a member of the G7, EU, or Australia. This both limits Russia’s oil revenues directly and gives negotiating leverage to those who buy Russian oil without using these services, further driving down prices. And, if Russia tries to provide the services itself, it raises Russia’s cost of exporting.
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As we look forward, one of the centerpieces of our strategy will be to counter attempts to evade our sanctions. While we’ve been able to cut off key Russian financial institutions from the global financial system and stop Russia from accessing critical defense inputs thus far, we know Russia is actively seeking ways to circumvent these sanctions—to find countries and companies that do not share our values and are willing to put the people of Ukraine at risk to turn a quick profit. In fact, one of the ways we know our sanctions are working is that Russia has tasked its intelligence services—the FSB and GRU—to find ways to get around them.
