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. Last Updated: 07/27/2016

U.S. Sees Double Hit For Russia's Economy

Russia will take a double hit from the global financial crisis because it is not isolated from the world and lacks domestic economic stability, a senior U.S. diplomat said.

Russia is seeing "the worst of both worlds," David Merkel, deputy assistant secretary of state for Russia, said in an interview Friday.

Reiterating the harsh rhetoric that the U.S. administration has adopted since Russia invaded Georgia in August, Merkel blamed the Russian government for the domestic stock market's disastrous performance and a jump in capital flight in the early days of the crisis.

Among the government's mistakes, he said, was the "talking down of certain companies." In July, Prime Minister Vladimir Putin attacked mining company Mechel, causing its shares to drop.

"There was already a downturn when the global downturn began," Merkel said.

After the brief August war in Georgia, Russia's stock market spiraled downward. President Dmitry Medvedev has said 75 percent of the drop was caused by global turmoil and 25 percent was because of domestic problems.

Merkel said Russia was not that isolated from the global economy. "Russia is not an insulated island outside of the world community," Merkel said. "With globalism, Russia is affected by things that happen outside its borders."

Merkel reiterated previous remarks by Secretary of State Condoleezza Rice that the Georgia war had reduced Russia's chances of joining the World Trade Organization. "Russia's actions have put in jeopardy its membership in WTO, its accession to the OECD and others," he said, adding that Moscow would probably not make it into the WTO next year.

Asked whether he considered Russia imperialist, Merkel said that although Moscow had cooperated with the United States and Europe in the past, its "recent actions are more in line with a 19th-century imperial country."

He also said Moscow needed to comply more fully with a peace plan for Georgia brokered by French President Nicholas Sarkozy and Moscow's decision to recognize South Ossetia and Abkhazia as independent would backfire.

"I am concerned of what precedent Russia is setting" with regard to other former Soviet republics with ethnic minorities, he said. "I think that is why we did not see anyone in the former Soviet Union pick up Russia's rhetoric and recognize Abkhazia and South Ossetia."

Merkel made clear that Washington would not soften its position on NATO expansion, seen as one of the reasons for Moscow's stance on Georgia. NATO membership for Georgia and Ukraine is just a matter of time, he said.

Merkel, who served under the national security adviser to President George W. Bush before moving to the State Department in March, did not say which U.S. presidential candidate he preferred but indicated that Russia had been better off with a Republican administration in the past: "When the Bush administration came in [in 2000], what the Kremlin was saying was, 'Oh, thank goodness. We know how to work with Republicans. This will make things very, very straightforward and productive.'"

Merkel said he would return to his native Texas when the next president takes office in January. "I have been in Washington for too long," he said.