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Janet Yellen warns of ‘enormous’ economic repercussions of war in Ukraine
“Russia’s actions represent an unacceptable affront to the rules-based global order and will have enormous economic repercussions in Ukraine and beyond,” Yellen said during testimony before the House Financial Services Committee. .
The war – and the West’s political response, primarily through sanctions – has already sent food and energy prices skyrocketing and raised concerns of an economic slowdown or even recession at a time of already rampant inflation around the world. In the United States, for example, inflation is at a level not seen in 40 years.

Yellen called the Russian invasion “brutal and unprovoked” on Wednesday, and stressed that the Treasury Department was committed to holding Russia “accountable for its actions.”

On Wednesday, the Biden administration imposed new sanctions on Russian banking institutions – Sberbank and Alfa Bank – as well as individuals, including the adult daughters of President Vladimir Putin. These new sanctions followed horrific images of carnage and possible war crimes in the Ukrainian town of Bucha.
But the fact that America’s European partners remain heavily dependent on Russian energy exports limits what the West can do. The United States intends to impose the maximum possible sanctions against Russia while being careful not to inflict undue suffering on its allies, Yellen said several times on Wednesday.

“The problem with blocking oil exports from Russia is that many countries, especially in Europe, are very dependent on this oil,” she said. “And we’re probably going to see prices skyrocket if we put a full ban on oil.”

Germany, for example, would be left behind – literally – if it stopped importing Russian gas. Germany is Russia’s biggest energy customer in the European Union, which depends on Moscow for around 40% of its natural gas.

“Globally, the fallout from the crisis is deepening economic vulnerabilities in many countries that are already facing higher debt burdens and limited policy options as they recover from Covid-19,” Yellen said.

Energy prices were pushed higher by supply concerns from Russia, the world’s largest crude oil exporter.

“We are witnessing the vulnerability that comes from relying on one fuel source or trading partner,” Yellen said, which is why diversifying energy sources and suppliers is imperative. .

But it’s not just about energy. Together, Russia and Ukraine account for almost a third of world wheat exports.

“Russia’s invasion disrupted the flow of food for millions around the world and caused prices to spike,” the Treasury Secretary said.

Yellen said the Treasury would pressure multilateral development banks to speed up food aid to “vulnerable” countries.

Meanwhile, Yellen was suspicious in response to questions from lawmakers about a potential conflict between China and Taiwan and what a US response to it might look like.

“We are certainly concerned about Taiwan and will act appropriately,” she said.

— CNN’s Betsy Klein and Kevin Liptak contributed to this report.

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