Yellen pushes Russia oil price cap in Asia
Treasury Secretary Janet Yellen is heading out on her first trip to Asia since taking office, aiming to use sit-downs with global counterparts to help build momentum for a complex effort to cap prices for Russian oil.
Yellen, who previously traveled to the region as Federal Reserve chair, departs Saturday on a 10-day trip that includes stops in Tokyo and Seoul. In between, she will attend the Group of 20 finance ministers gathering in Bali, Indonesia, July 15-16.
The trip poses a fresh economic-diplomacy challenge for the Treasury chief, who led talks last year on a global corporate-tax deal — though one that’s now proving a struggle to complete. Group of Seven leaders last week instructed their ministers to explore the Russia oil-price-cap plan favored by the U.S., putting Yellen’s role in the spotlight.
The aim is an arrangement to ban, by the end of this year, the insurance and transport services needed to ship Russian crude and petroleum products unless the oil is purchased below an agreed price.
U.S. Treasury officials signaled that the price cap is a central focus of the trip, saying Yellen would pursue the topic at each of her three stops. Speaking to reporters Thursday, they added that U.S. officials have been discussing the plan with a growing circle of governments, without offering specifics.
The goal is to limit the revenue Moscow earns from oil exports without driving Russian oil off the global market, and thus causing prices to once again soar. But critics have called it too complex to work in practice. It’s also unclear whether countries like China and India, both G-20 members who are among the largest buyers of Russian oil, would cooperate.
Meantime, Russia’s expected presence at the G-20 meetings could prove contentious — as was the case at a spring gathering in Washington — preventing the group from issuing an official communique. Those statements are typically stuffed with watered-down language on general goals, but can signal progress toward coordinated action on pressing global issues.
“It’s hard to see how a group like the G-20, with Russia as a member, is going to agree on much of anything,” said Matthew Goodman, senior vice president for economics at the Center for Strategic and International Studies in Washington. “Half of the people won’t agree to anything with Russia in the room, and the other half won’t agree to anything without Russia in the room.”
Yellen’s focus may be forced to shift somewhat to the bilateral and small group meetings to advance the Biden administration’s agenda, Goodman said.
U.S. Secretary of State Antony Blinken appears to be taking a similar approach this week at a gathering of G-20 foreign ministers.
Among Yellen’s expected other priorities on the trip:
• Maintaining the international alliance that’s imposing sanctions on Russia over its invasion of Ukraine.
• Keeping alive the somewhat troubled pact on global corporate taxes.
• Urging progress on pandemic preparedness, climate change and food security.
• Doing more to help heavily indebted countries as they struggle with a strengthening US dollar and slowing global growth.
On the debt-relief front, China has proved a challenge for Yellen and her developed-nation counterparts. Beijing, the dominant official lender to poor countries, has shown little enthusiasm for a new G-20 program, known as the Common Framework, meant to streamline the process of organizing creditors to act jointly with struggling debtors.
At a meeting in Bonn, Germany last month, G-7 finance ministers called out China, urging it to “contribute constructively” on debt treatment.
On her first stop, in Tokyo Sunday through Tuesday, Yellen will likely hear concerns about the strengthening of the U.S. dollar against the yen in recent months. Japan’s currency has tumbled in recent weeks to the lowest since 1998, in a trend that’s sapped household purchasing power and stoked concern in the administration of Prime Minister Fumio Kishida.
While few observers think there’s any likelihood of coordinated U.S.-Japan foreign-exchange intervention at this point, it wouldn’t be a surprise for currency matters to come up in Yellen’s meetings.
“My assumption is the Japanese will want some kind of reassurance on the continued strengthening of the dollar that — under certain circumstances — the Treasury would agree to coordinated intervention to slow or stop depreciation of key currencies,” said Adam Posen, president of the Peterson Institute for International Economics in Washington.
Asked about the topic during the press briefing, a Treasury official declined to comment.
Yellen will also visit Seoul after the G-20. South Korea, Asia’s fourth-largest economy, has also seen currency depreciation. It’s also featured as a key component of talks on strengthening semiconductor supply chains; President Joe Biden visited the nation in May.