WASHINGTON (AP) – The mounting economic damage to Ukraine from the ongoing bombing of Russia is prompting the US and its allies to provide billions in aid to the beleaguered country — as well as to seek other sources of funding, including from Russia itself.
After the US on Thursday announced $1.3 billion in new economic and military aid to Ukraine, Treasury Secretary Janet Yellen acknowledged that “this is just the beginning of what Ukraine will need to rebuild.” .
The war has already caused more than $60 billion in damage to buildings and infrastructure, World Bank President David Malpass said. And the International Monetary Fund said in its latest World Economic Outlook that Ukraine’s economy will shrink by 35% this year and next.
The question of who will pay to save Ukraine from the war has increasingly turned to the Russian state.
Yellen said Thursday that seeking funds to rebuild Ukraine from Russia itself “is something we should be pursuing.”
When asked during a press conference about the potential of using frozen Central Bank funds to support Ukraine, Yellen said “I wouldn’t want to take it lightly,” adding that it was in consensus with allies and partners of the USA had to happen .
Ukrainian President Volodymyr Zelenskyy said in a virtual address to the leaders of the IMF and World Bank that “a special tax on war is needed”. He demanded that proceeds from sanctioned central bank property and reserves be used to compensate Ukraine for its losses.
He added that frozen Russian assets “must be used to rebuild Ukraine after the war and pay for the losses inflicted on other nations.”
The statements came after the Biden administration announced that the US is providing Ukraine with an additional $500 million in financial aid to maintain salaries, pensions and other government programs while it fends off the Russian invasion.
“We plan to deploy this direct aid to Ukraine as soon as possible to address the most pressing needs,” Yellen said.
The new funding comes on top of the $500 million in economic aid that President Joe Biden unveiled in March.
Yellen met Prime Minister of Ukraine Denys Shmyhal along with Deputy Finance Minister Wally Adeyemo and Finance Minister of Ukraine Serhiy Marchenko ahead of the announcement. The announcement comes amid the spring meetings of the IMF and World Bank, which were dominated by talks on dealing with the fallout from the Russian war in Ukraine.
Calls to use frozen central bank funds to rebuild Ukraine are growing louder as the human and financial costs of the war mount. Additionally, governments that voluntarily provide grants and aid to Ukraine must contend with rising inflation affecting food and energy prices in their home countries.
However, the liquidation of the Central Bank of Russia’s frozen assets, among other sanctioned assets, will not be easy and will likely require action by Congress.
“I’m not sure this would be possible without laws authorizing the use of these assets,” Yellen said.
The Ministry of Finance imposed a new wave of sanctions against Russia on Wednesday. The sanctions packages include penalties imposed on more than 40 people and organizations accused of sanctions evasion. The sanctions include the first series of penalties against a cryptocurrency mining company related to the war.
Yellen said Thursday that the US continues to “tighten the vise of our economic squeeze campaign.”
She responded cautiously to a question about whether European allies needed to ban Russian oil and gas imports, a recurring theme during the war in Ukraine.
“Europe clearly needs to reduce its energy dependency on Russia. But we have to be careful,” Yellen said, noting that this would lead to a global spike in oil prices. In this situation, she said, Russia could still benefit financially even if its sales in Europe fell.
On Wednesday, Yellen and Ukraine’s finance minister walked out of a Group of 20 meeting as the representative of Russia began to speak.
Several other finance ministers and central bank governors also left the room, according to an official familiar with the meetings, who spoke on condition of anonymity as the event was not public.
Some ministers and central bank governors attending the meeting practically turned off their cameras as Russian Presidential Deputy Vladimir Putin spoke, the person said.
“Things just cannot go on as usual for Russia in terms of its participation in our global forums,” Yellen said.
However, Yellen expressed no commitment to proposals to remove Russia from the G-20, which is made up of representatives of industrialized and emerging countries.
“We will look for a way to express our disapproval while recognizing that we still have work to do,” she said.
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Associated Press reporter Paul Wiseman contributed to this report.