Europe not heading for recession this year despite Ukraine crisis, says senior US Treasury official

An unprecedented campaign of economic sanctions against Russia is not likely to cause a recession in Europe despite soaring energy prices, a senior US official has told Sky News.

In an exclusive interview, Wally Adeyemo, deputy secretary of the US Treasury, said that his country was committed to doing everything it could to help its allies in Europe weather a cost of living crisis triggered in part by Russia’s invasion of Ukraine.

“The thing we’re committed to doing is using our energy independence to help our allies,” Mr Adeyemo said.

“We’re working closely with the UK to call on major oil producers to make sure that the market is well supplied, and we’re using our Strategic Petroleum Reserve to help do that as well.”

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So far, President Joe Biden has committed to releasing 90 million barrels of oil from the country’s reserves, stored in a complex of caverns on the Texas and Louisiana coasts.

Europe and the US were in a good position to ride out any potential turbulence caused by sanctions and the deteriorating security situation in Eastern Europe, Mr Adeyemo said.

He praised the decisive economic interventions undertaken by the UK and the US to soften the blow of COVID-19, saying they had set the countries up well to deal with the current crisis.

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“Our balance sheets are strong and we think that that strength is going to help us as we come into the challenges created by the invasion from a position of strength, not weakness,” he said.

“We of course want to pay attention to rising commodity prices and take actions to nullify those impacts on individuals.”

Commodity prices have risen sharply, particularly for food, a real-world household impact that families were already beginning to feel before Russia and Ukraine – the combined source of 30% of the world’s wheat – began fighting in the breadbasket of Europe.

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“But we don’t see the chance of recession this year as significant,” he added. “If you look at private sector forecasts, they agree, as do forecasts put out by our central banks.

“In order to ensure that growth continues we’re going to have to be vigilant and we’re going to have to take action.”

Vladimir Putin’s war in Ukraine has deepened the ongoing energy crisis, with oil prices soaring and the US, EU and UK all vowing to reduce reliance on Russian hydrocarbons.

But despite the ripple effects of the West’s punishing sanctions on Russia, Mr Adeyemo said that the US and its allies could still go further if Mr Putin chose to not halt his invasion of Ukraine.

“There is more that we can and will do as long as the Russian invasion of Ukraine continues,” he said.

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“We went very hard – we went after the Russian central bank, immobilising their assets, meaning their war chest they have built up for this exact occurrence is unable to be used to support their economy.”

As a result, Mr Adeyemo said, Russia’s economy was contracting more than it had in the past 20 years.

The official also praised the unity between nations to try and bring an end to the war. So far, more than 30 countries have imposed sanctions against Russia.

“What I’ve seen has been a solidity of response to this crisis that I haven’t seen in my time at Treasury,” he said.

But he refused to be drawn on why Roman Abramovich, the owner of Chelsea Football Club and one of Russia’s richest men, had not yet been sanctioned by the US.

According to The Wall Street Journal, Volodymyr Zelenskyy, the Ukrainian president, recently contacted the US to ask it not to sanction Mr Abramovich, who is apparently helping to broker peace talks between Russia and Ukraine.

“I’m not going to get into the individuals we’ve chosen to sanction or not to sanction,” Mr Adeyemo said.

“What I can tell those individuals who are Russian elites and oligarchs is that we are watching you, we’re watching where you’re hiding your assets, and the people you’re giving your assets to.”

“We’re prepared to act, to not only go after you, but to also go after those people who offer you material support. We’ll sanction them too.”

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