Yellen weighs war costs on frozen Russian assets

WASHINGTON (Associated Press) – The mounting economic damage to Ukraine from the ongoing Russian bombing has prompted the United States and its allies to rush to provide billions of dollars in aid to the beleaguered country – and to seek other sources of cash as well, including Russia itself.

After the United States announced $1.3 billion in new economic and military aid to Ukraine on Thursday, Treasury Secretary Janet Yellen acknowledged that “this is only the beginning of what Ukraine will need to rebuild.”

World Bank President David Malpass said the war has already caused more than $60 billion in damage to buildings and infrastructure. The International Monetary Fund mentioned in its latest World Economic Outlook The Ukrainian economy will shrink by 35% this year and next.

The question of who will pay to bring Ukraine back from the war has increasingly turned to the Russian state.

Yellen said Thursday that looking to Russia itself for funds to rebuild Ukraine is “something we should strive for.”

When asked during a press conference about the possibility of using frozen Russian Central Bank funds to support Ukraine, Yellen said, “I don’t want to do it lightly,” adding that it should be done unanimously with US allies and partners.

“There is a need for a special tax on war,” Ukrainian President Volodymyr Zelensky said in a hypothetical address to the leaders of the International Monetary Fund and the World Bank. He called for the use of proceeds from sanctioned property and central bank reserves to compensate Ukraine for its losses.

He added that the frozen Russian assets “should be used to rebuild Ukraine after the war as well as to pay for the losses suffered by other countries.”

The comments came after the Biden administration announced that the United States is providing an additional $500 million in financial assistance to Ukraine to maintain salaries, pensions and other government programs while fending off the Russian invasion..

“We plan to deploy this direct assistance to Ukraine as quickly as possible, to use it to meet the most urgent needs,” Yellen said.

The new funding comes in addition to the $500 million in economic aid that President Joe Biden unveiled in March.

Prior to the announcement, Yellen met Ukrainian Prime Minister Denis Shmyhal, along with Deputy Treasury Minister Wally Ademo and Ukrainian Finance Minister Serhiy Marchenko. This announcement comes against the backdrop of the Spring Meetings of the International Monetary Fund and the World Bank It is dominated by conversations about how to manage the fallout from the Russian war in Ukraine.

Calls are mounting to use frozen central bank funds to rebuild Ukraine as the human and financial cost of the war mounts. In addition, governments that volunteer grants and aid to Ukraine must struggle with rising inflation affecting food and energy prices in their home countries.

However, liquidating Russia’s frozen central bank assets, among other sanctioned properties, will not be easy and will likely require congressional action.

“It is not clear whether this would be possible without legislation authorizing the use of these assets,” Yellen said.

Today, Wednesday, the US Treasury imposed a new wave of sanctions against Russia. Sanctions packages include penalties imposed on more than 40 persons and entities accused of evading penalties. The penalties include the first set of penalties against a cryptocurrency mining company Regarding the war.

Yellen said Thursday that the United States continues to “repress our campaign of economic pressure.”

She responded cautiously to a question about whether European allies need to ban Russian oil and gas importsa recurring issue during the war in Ukraine.

It is clear that Europe needs to reduce its dependence on Russia for energy. “But we need to be careful,” Yellen said, noting that there will be a resultant rise in oil prices around the world. Under this situation, she said, Russia can still benefit financially even if its sales in Europe decline.

On Wednesday, Yellen and Ukraine’s Finance Minister pulled out of the G20 meeting The representative of Russia also started talking.

Several finance ministers and central bank governors also left the room, according to an official familiar with the meetings, who spoke on condition of anonymity because the event was not public.

The person said that some of the ministers and central bank governors who attended the meeting nearly turned off their cameras when a representative of Russian President Vladimir Putin spoke.

“It simply cannot be business as usual for Russia in terms of its participation in our global forums,” Yellen said.

But Yellen did not adhere to the proposals to take Russia out of the Group of Twenty, which consists of representatives of industrialized and emerging market countries.

“We will look for a way to announce our refusal while still acknowledging that we have a lot of work to do,” she said.

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Associated Press reporter Paul Wiseman contributed to this report.