Yellen says Biden will press Congress for more economic aid to Ukraine

But Yellen was non-binding on whether the US could use some of the hundreds of billions of dollars in foreign exchange reserves held by Russia’s central bank, which the Biden government and its allies have frozen, to help cover reconstruction costs.

The magnitude of the recent US contribution and Yellen’s cautious comments about seeking more economic aid underscore the challenges the Biden administration faces in trying to help Ukrainians survive the Russian onslaught, even as much of the world leaves Moscow action condemned. The US has helped coordinate sanctions that have hit the Russian economy, and the international community has provided or pledged more than $24 billion in aid in 2022, according to Treasury Department estimates.

But some European allies still resist a full Russian oil and gas embargo because it could have a significant impact on global energy prices and economic growth, while other major economies have refused to criticize Russia’s invasion. Those cracks were seen at Wednesday’s Group of 20 meeting in Washington, when Yellen and some European and Canadian officials walked out in protest as Russia’s finance minister began speaking, while others, including officials from China, India and Brazil, stayed.

Ukrainian officials came to Washington this week to receive a $50 billion aid package from international allies as it braces for a massive funding shortage in the coming months. Oleg Ustenko, a top adviser to President Volodymyr Zelenskyy, told POLITICO that officials hoped the Group of Seven countries would commit to $10 billion in initial financial assistance, with the US providing about half would shell out that amount.

Asked where Ukraine will get the rest of the money needed to continue funding her government, Yellen said G-7 members held talks this week, along with heads of the International Monetary Fund and World Bank, about how the funds could be raised.

“We are united in recognizing that we must find ways to address Ukraine’s needs,” she said, adding that the administration intends to return to Congress with another supplemental aid proposal.

The $500 million announced Thursday comes from an earlier aid package Congress approved this year and builds on the $500 million President Joe Biden Zelenskyj pledged in March, Yellen said. It would help Ukraine continue essential government operations such as salaries, pensions and other social assistance programs, which Yellen said are “necessary to avoid a worsening of the humanitarian situation.”

“Ukraine’s needs are urgent and we plan to deploy this direct aid to Ukraine as soon as possible to address the most pressing needs,” she said.

Ustenko and others have suggested that the US should divert some of the Russian central bank’s frozen foreign exchange reserves to Ukraine’s reconstruction efforts.

Yellen said it makes sense to look to Russia to provide some of what is needed to rebuild Ukraine, the cost of which “will eventually be enormous”. But she said it’s not clear that the US could seize these foreign exchange reserves without a change in the law and explicit approval from Congress. And she declined to say whether the Treasury Department would support such a move.

“This is a very significant step,” Yellen said. “And it’s one where we need to think carefully about the consequences before we do it.” I wouldn’t want to take it lightly and I think our coalition and our partners need to be comfortable with that and supportive of that and I think we need to have all these discussions to think these issues through before I want to say that what our position on that would be.”