Sanctions on Russia will cause 'significant' long-term damage to its economy, the G7 says

Joe Biden poses for a photo with G7 leaders — President Joe Bidens points at photographers as he joins G7 leaders for the group's "family photo" after a March meeting in Brussels.
Henry/Nicholls/Pool/AFP

The G7 says sanctions are having a "massive" impact on Russia's economy and will cause long-term damage.
International companies are withdrawing from Russia and imports are declining.
Putin, however, has said Western sanctions have failed.

The G7 says its sanctions are having a "massive" impact on Russia's economy and will cause "significant" long-term damage.

A joint statement released Wednesday by G7 finance ministers and central bank governors condemned Russia's invasion of Ukraine and said that member countries were working together to enforce sanctions and prevent individuals and groups from evading them.

The G7 is an intergovernmental forum made up of Canada, France, Germany, Italy, Japan, the UK, and the US, while the European Union is also included as a 'non-enumerated' member. Russia was suspended from the group – then the G8 – after it annexed Crimea in 2014, before announcing in 2017 that it would permanently leave the group.

The West has imposed sweeping sanctions on Russia after Moscow ordered troops into Ukraine on February 24. The sanctions are aimed at hobbling the country's economy, cutting funding to its military, and putting pressure on President Vladimir Putin to end the conflict. Measures have included limiting trade, banning transactions with Russia's central bank, barring access to the international payments system SWIFT, and cutting off access to currency reserves.

The G7 said the sanctions were "already having the intended massive impact on the Russian economy."

"The significant long-term hit to the Russian economy will become even clearer over time," the group added.

Jen Psaki, the White House's press secretary, said in mid-April that Western sanctions had reversed 30 years of economic progress in Russia.

"The Russian stock market has lost over a quarter of its value and had to remain shut for almost a month; hundreds of international companies are withdrawing from Russia and investment is drying up; inflation in Russia has increased; and Russian imports are declining with a knock-on impact on Russia's long-term growth prospects," the G7 said.

McDonald's, Goldman Sachs, and KPMG are among Western companies who have announced their withdrawal from the Russian market.

Meanwhile the West's sanctions strategy is taking its toll on some of Russia's key economic sectors. The country's second-biggest bank, VTB, has taken a big step toward default after having to pay holders of its dollar-denominated bonds in rubles, while Rosneft, Russia's state-run oil producer, is racing to sell its crude oil ahead of an expected further tightening of sanctions.

Despite indications that Russia's economy is starting to suffer, Putin has said the West's "economic blitzkrieg" has failed. He told ministers that retail demand had normalized and unemployment had remained low, though he acknowledged that inflation was soaring, per a translation by The Wall Street Journal.

The G7 said in its statement that the sanctions imposed by its member countries were designed to minimize harm to the global economy and have excluded medical and key agricultural products.

The West has started to reduce imports of Russian energy – a major contributor to the company's economy. Natural gas prices have spiked as a result, and some countries are scrambling to find alternative energy supplies, but the G7 said its member countries would "coordinate closely" to ensure stable supply.

The G7 also committed to not conducting government-to-government financial transactions with Russia and said that it regretted Russia's participation in G20, International Monetary Fund, and World Bank meetings this week.

Read the original article on Business Insider