Yellen says OPEC oil production is bad for the global economy

US Treasury Secretary Janet Yellen said Opec+’s move to cut oil production was “unhelpful and unwise” for the global economy, particularly for emerging economies already grappling with high energy prices.

The Biden administration has been vocal in criticizing the decision by the oil cartel, backed this week by Saudi Arabia and Russia, which took the step despite US pressure to keep global oil prices low.

“I think Opec’s decision is unhelpful and unwise – it’s uncertain what impact it will have in the end, but it’s certainly something I didn’t think was appropriate in the circumstances we’re facing,” he said Yellen in a phone interview with the Financial Times. “We are very concerned about developing countries and the problems they face.”

Yellen was addressing the annual meeting of the IMF and World Bank in Washington next week, which will be dominated by discussions about high inflation and commodity prices, the impact of drastic monetary tightening by many central banks, and the economic and financial fallout from the war in Ukraine.

“I think we will exchange views on whether our countries are addressing these issues and try to consider whether our collective response in this difficult environment is reasonable and the best we can do,” she said.

The US hopes to use the meetings to urge European countries to provide economic aid to Ukraine much more quickly, amid growing frustration in Washington that some of its allies have failed in fulfilling their vows to provide financial aid to Kyiv. are in arrears.

“A number of countries have pledged significant economic aid but just haven’t gotten around to distributing it. The pace of money transfer to Ukraine is way too slow. There are commitments, but the money has to be put in,” Yellen said, noting that the US had allocated $8.5 billion in grants to Ukraine and another $4.5 billion had just been approved by Congress.

“We need to see other countries keep their promises. And it’s crucial to get that funding to Ukraine as soon as possible,” she added.

Valdis Dombrovskis, Executive Vice-President of the European Commission, said on Tuesday the EU is trying to speed up its disbursements to Ukraine and will work “intensively” with member states to get the last €3bn committed earlier this year.

However, he said it was also important to have a “more structured and predictable flow of funding” for Ukraine next year and that the EU would integrate this into its work to prepare its 2023 budget.

US and G7 allies are entering the final stages of talks to set a price cap on Russian oil exports, in order to deprive Moscow of vital energy revenues to fund the war, but also in a way that some oil doesn’t flow out of the country lead to a worldwide jump in prices.

“Keeping prices down is something that’s especially helpful for developing countries that are suffering from high energy prices,” Yellen said.

But the Treasury Secretary declined to know what countermeasures the US might take in response to Opec’s move, after White House officials said they would begin consultations with Congress on possible responses.

“The President has long focused on exploring all the options available to try to bring them forward [oil prices] down,” she added.

Yellen is likely to have some concerns from counterparts around the world about the value of the dollar, which has appreciated sharply against many other currencies in recent months as the Federal Reserve has aggressively hiked interest rates. But she said the dollar’s rise has been driven by economic reality.

“We’ve seen a significant appreciation in the dollar, but I think that’s mostly due to differences in macro fundamentals across countries. In the case of the US, it is refugee flows that respond to geopolitical tensions and, of course, different rates of monetary tightening,” she said.

Yellen also dismissed concerns about some of the market turmoil and volatility over the past few weeks.

“We monitor currency movements and their impact very closely. And we continue to believe that the markets are performing fairly well and are generally reasonable given the underlying differences between countries, politics and the economic situation,” she said.

Yellen declined to comment on the UK’s sweeping tax cuts, which rocked financial markets before the Bank of England was forced into emergency intervention and Prime Minister Liz Truss withdrew part of the plan.

additional reporting by Sam Fleming in Brussels Yellen says OPEC oil production is bad for the global economy

Adam Bradshaw

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