Yellen Warns Nations Staying Neutral in Russia’s War With Ukraine
The U.S. has cautioned China, India and others not to aid Moscow or undercut sanctions
WASHINGTON—Treasury Secretary Janet Yellen said countries that maintain their ties to Russia after its invasion of Ukraine risk facing isolation from the global economy, sending a warning shot to nations that have so far remained neutral in the conflict.
As it has crafted with its allies a wide-ranging package of sanctions on Russia, the U.S. has urged China, a close partner of Russia, to not provide substantive aid to Russia or take steps to undercut the sanctions. It has also sought to push countries that haven’t put penalties on the Russian economy, notably India, to take a tougher stance against Moscow.
In her speech, made a week before finance officials from around the world will descend on Washington for the spring meetings of the International Monetary Fund and World Bank, Ms. Yellen said indecision about how to respond to the war in Ukraine weakens the international financial system.
“Let me now say a few words to those countries that 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. Such motivations are shortsighted,” she said at the Atlantic Council. “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.”
Ms. Yellen singled out China, saying that it could become more difficult for the U.S. and its allies to separate their economic interests in the country from national security concerns if Beijing supports Russia’s invasion. China has maintained normal trade relations with Russia despite the conflict, and so far major Chinese companies and banks haven’t helped Russia evade sanctions.
“The world’s attitude towards 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,” she said.
While Ms. Yellen didn’t call out any other countries by name, the Biden administration has stepped up its engagement in recent weeks with India, a key U.S. partner that has maintained a neutral stance amid the war in Ukraine.
During a virtual meeting Monday, President Biden urged Indian Prime Minister Narendra Modi on Monday not to accelerate or increase India’s purchase of Russian oil, according to the White House, and both the U.S. and Russia have recently dispatched officials to India. India has longstanding defense ties to Russia and hasn’t denounced the invasion of Ukraine.
“I think that, to date, there are certainly areas where we have been disappointed by both China and India’s decisions in the context of the invasion in terms of their reaction overall,” Brian Deese, the director of the White House National Economic Council, said last week. “Our message to the Indian government is that the costs and consequences for them of moving into a more explicit strategic alignment with Russia will be significant and long-term.”
The Indian embassy in Washington didn’t immediately respond to a request for comment.
A group of House lawmakers also recently pushed for the Biden administration to follow a more confrontational approach with Saudi Arabia after it has refused to cooperate with Washington over Russia’s invasion of Ukraine.
Ms. Yellen said the war in Ukraine will require an overhaul of international financial agreements and institutions, with an eye toward diversifying supply chains and commodity sources. Europe’s dependence on Russian oil and gas has presented an obstacle to efforts to weaken the Russian economy while still sparing Western economies from harm.
“We cannot allow countries to use their market position in key raw materials, technologies or products to have the power to disrupt our economy or exercise unwanted geopolitical leverage,” she said. She added that countries should try to arrange new trade agreements that reduce the influence of non-friendly partners in a move she called “friend-shoring” to allied nations.
A central concern at next week’s spring meetings will be food shortages and price increases brought on by the war between Russia and Ukraine, which are major suppliers of wheat and fertilizer. Ms. Yellen said she would convene a meeting on the issue.
The IMF, World Bank and international development banks are all in need of strengthening, Ms. Yellen said, pointing to the divergent ability of poor and rich nations to respond to the Covid-19 pandemic and the need to better marshal private capital to developing economies.
“Some may say that now is not the right time to think big. Indeed, we are in the middle of Russia’s war in Ukraine, alongside the lingering fight against a global pandemic and a long list of other initiatives under way,” Ms. Yellen said. “Yet, I see this as the right time to work to address the gaps in our international financial system that we are witnessing in real time.”