Apr 13, 2022 - Economy

Yellen: Don't help Russia evade sanctions, or else

Treasury Secretary Janet Yellen

Treasury Secretary Janet Yellen. Photo: Amanda Andrade-Rhoades/Bloomberg via Getty Images

Treasury Secretary Janet Yellen delivered a stern message to China and other countries that might want to help Russia evade international sanctions Wednesday, in a speech that puts the Ukraine war at the center of global economic diplomacy.

Driving the news: With the world's financial diplomats set to descend on Washington in the coming days for the spring meetings of the IMF and World Bank, Yellen's speech lays down a gauntlet: The U.S.' central goal right now is maintaining global unity around financial punishment of Russia for its invasion.

  • It is a contrast to the usual focus of these gatherings. This time, technical talk of capital flows and current accounts will be supplanted by war and peace.
  • "It’s now evident though that the war between Russia and Ukraine has redrawn the contours of the world economic outlook," Yellen said, according to a prepared text for a speech scheduled Wednesday morning at the Atlantic Council.

What they're saying: "Let me now say a few words to those countries who are currently sitting on the fence, perhaps seeing an opportunity to gain by preserving their relationship with Russia and backfilling the void left by others," she said.

  • "Such motivations are short-sighted. The future of our international order, both for peaceful security and economic prosperity, is at stake. This is an order that benefits us all. And let’s be clear, the unified coalition of sanctioning countries will not be indifferent to actions that undermine the sanctions we’ve put in place."

That's about as close as the typically restrained Treasury secretary has come to making public threats to major trading partners.

Her comments about China, which has maintained relatively cozy relations with Russia — raised the possibility that by embracing Russia, China could risk its role in the global economy.

  • "The world’s attitude toward China and its willingness to embrace further economic integration may well be affected by China’s reaction to our call for resolute action on Russia," Yellen said.
  • "China cannot expect the global community to respect its appeals to the principles of sovereignty and territorial integrity in the future if does not respect these principles now when it counts," she added.

She also emphasized the impact of war in Eastern Europe on global supplies of food, and the risk that spiking commodity prices will cause mass hunger in poorer nations, saying that much of the work at IMF and World Bank spring meetings next week will focus on supporting developing countries dealing with those shocks.

  • "I am deeply concerned about the impact of Russia’s war on food prices and supply, particularly on poor populations who spend a larger share of their income on food," Yellen said.
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