Andrea Shalal, David Lawder

WASHINGTON, (Reuters) – Massive sanctions imposed on Moscow by the United States of America and its allies over Ukraine’s invasion are making Russia a closed economic system that lacks the ability to make its own technology and consumer goods. This was stated Friday by a top U.S. Treasury Department official.

An official speaking under anonymity said that the restrictions placed by Russia on foreign currency meant the international value of the Russian rouble (which fell steeply during the conflict but has since recovered some), was not being determined by supply and demand.

Officials said emerging black market activity indicated a sharply decreased value of the currency. It also reflected the weakness in the rouble’s role as a financial instrument. An erosion of the purchasing power was evident by sharply increasing domestic inflation.

According to an official, the Russian government controls over the availability of foreign currency means that the international value of the ruble is unrelated to its performance. Official said that coordinated sanctions had had an extremely significant effect on Russia’s economy. Outside analysts are forecasting a 10% contraction in Russian gross national product for this year.

According to the official, Washington is happy with the enforcement of export control and sanctions so far but remains vigilant for violations.

Officials stated that the ruble had suffered a severe decline in purchasing power and weekly inflation was at 1.5% for the past three weeks. This is a cumulative rise of nearly 6.6%.

Since the Russian invasion began on February 24, 2004, the rouble has seen a significant recovery in its value relative to dollars. In early Moscow trading, Friday’s rouble hit a record five-week-high before stabilizing in the 83 to 84 range against the dollar.

According to the official, sanctions were intended to cripple Russia’s economy and prevent the Russian military from procuring parts and equipment to support the war effort.

The official stated that Washington intended to keep humanitarian exemptions from sanctions due to growing food insecurity and Russia’s position as major wheat producer.

Additional exemptions were made to safeguard Western financial institutions which hold Russian assets. They included a license that allowed Russian debt payments.