Yellen calls on Europe to step up aid to Ukraine

BRUSSELS — Treasury Secretary Janet L. Yellen on Tuesday urged European countries to increase spending to support Ukraine as Russia’s attacks on the country’s critical infrastructure showed few signs of abating.

The United States and Europe have coordinated closely to enact sweeping sanctions against Russia in the nearly three months since its President, Vladimir V. Putin, ordered an invasion. But they have been less aligned with the need to help sustain Ukraine’s economy and help rebuild it once the war is over.

Congress has already approved a $13.6 billion emergency spending package for Ukraine and is expected to approve an additional $40 billion in aid. While the European Union and international financial institutions have also made significant aid contributions, Ms Yellen said more needs to be done.

“I sincerely ask all our partners to join us in increasing their financial support for Ukraine,” Yellen said in a speech at the Brussels Economic Forum, according to her prepared remarks. “Our joint efforts are essential to help ensure that Ukrainian democracy prevails over Putin’s aggression.”

The Treasury Secretary is in the midst of a week-long trip to Europe, with stops in Warsaw, Brussels and Bonn, Germany, where she will meet her counterparts at the Group of 7 finance ministers summit. Aid to Ukraine should be a central topic of this meeting.

Ms Yellen said Ukraine’s financial needs are immediate and it lacks funds to pay soldiers, pensioners and employees to run its government.

“What is clear is that the bilateral and multilateral support announced so far will not be enough to meet Ukraine’s needs, even in the short term,” she said.

Whether his appeal will be heard remains to be seen. European nations face their own economic pressure, including rapid inflation and soaring energy costs, and great challenges await as they seek to wean themselves off Russian energy.

Ms Yellen said the United States would help break Europe’s dependence on Russian energy, in part by increasing US exports of liquefied natural gas. She acknowledged that some climate targets for reducing emissions could be set back by the need to rely on coal and fossil fuels, but she said the current situation should remind us of the need to “redouble our efforts on ‘clean and renewable energy’.

Energy is another major issue that policymakers will discuss at the Group of 7 finance ministers’ summit in Bonn later this week. The United States is expected to pressure the European Union to consider alternative options ahead of its plan to phase in a Russian oil embargo by the end of the year.

Treasury Department officials said Tuesday they want Europe to consider pricing mechanisms such as a price cap or a tariff that would eat away much of Russia’s oil profits while giving the country enough incentives to continue producing.

Treasury officials declined to share their estimates of the impact of an embargo on the price of oil, but said limiting global oil supply could push prices higher at a time when the inflation was already at its peak.

Following a meeting with European Commission President Ursula von der Leyen, Ms Yellen told reporters she believed tariffs on Russian oil could be passed quickly and combined with the phase-out proposal that Europe is considering.

“They talk about next year as a timeline and in the meantime it might be possible to combine a phase-out with a price mechanism,” Ms Yellen said, referring to a tariff or a price cap. “It is extremely important that they reduce their dependence on Russian oil; we are very much in favor of it.

She added that the United States would help ensure that Europe has energy supplies to meet its needs.

In her speech, Ms Yellen said Russia’s decision to cut gas supplies to Poland and Bulgaria should be a lesson that Western countries should not trade national security for cheaper resources. This situation now makes them vulnerable to countries that can use their abundance of natural resources to disrupt markets.

She cited China as a concern in this regard because of its supply of rare-earth minerals that are used to make high-tech planes, cars and batteries.

“China is building a sizeable market share in certain technology products and is seeking dominance in the manufacture and use of semiconductors,” Yellen said. “And China has used a variety of unfair trade practices in its efforts to achieve this position.”

Yet Ms Yellen made it clear that she was not calling for more protectionism or a reversal of globalisation. Instead, she said, nations should not put all their eggs in one basket when it comes to international trade.

“My point is to suggest that we should consider ways to maintain free trade and at the same time reduce some of these risks,” she said.