OPEC oil production is bad for the global economy, says Yellen

US Treasury Secretary Janet Yellen said OPEC+’s decision to cut oil production was “pointless and reckless” for the global economy, particularly emerging markets already struggling with high prices. of energy.

The Biden administration has strongly criticized the move this week by the Saudi and Russian-backed oil cartel, which took the move in defiance of US pressure to keep global oil prices low.

“I think OPEC’s decision is useless and unwise; it’s not clear what impact it will end up having, but it’s certainly something that, to me, didn’t seem appropriate, given the circumstances we’re facing,” Yellen said in a phone interview with the Financial Times. “We are very concerned about developing countries and the problems they face.”

Yellen was speaking ahead of the IMF and World Bank annual meetings in Washington next week, which will be dominated by discussions of high inflation and commodity prices, the impact of sharp monetary policy tightening by many banks plants and the economic and financial impact. of the war in Ukraine.

“I think we are going to exchange views on whether our countries are addressing these issues and try to consider whether our collective reaction adds up to something that is sensible, and the best we can do, in that difficult environment,” he said. .

The United States hopes to use the meetings to pressure European countries to deliver economic aid to Ukraine much faster, amid growing frustration in Washington that some of its allies are behind in terms of keeping their promises to help financially. to Kyiv.

“Several countries have promised significant economic assistance, but simply haven’t gotten around to distributing it. The pace of money transfer to Ukraine is too slow. There are commitments, but the money needs to be deployed,” Yellen said, noting that the US had provided $8.5 billion in grants for Ukraine and that Congress had just approved another $4.5 billion.

“We need to see other countries deliver on the promises they have made. And it is critical to get these funds to Ukraine as quickly as possible,” she added.

Speaking on Tuesday, Valdis Dombrovskis, executive vice president of the European Commission, said the EU was seeking to speed up its disbursements of funds to Ukraine and would “work intensively” with member states to unlock the final €3bn of a €9bn package. euros that the leaders pledged earlier this year.

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

US allies and the G7 are entering the final stretch of talks to set a price cap on Russian oil exports, in order to deprive Moscow of vital energy revenues to finance the war, but also to keep the country’s oil flowing in a way that doesn’t lead to a spike in prices around the world.

“Keeping prices down is particularly helpful for developing countries suffering from high energy prices,” Yellen said.

But the Treasury secretary did not discuss countermeasures the United States might implement in response to OPEC’s move, after White House officials said they would begin consultations with Congress about possible reactions.

“The president has long been focused on exploring all available options to try to bring [oil prices] down,” he added.

Yellen is likely to face some concern from her 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 raised interest rates. But he said the dollar’s rise was driven by economic reality.

“We have seen a significant appreciation of the dollar, but I think it is mainly due to differences in macroeconomic fundamentals between countries. In the case of the US, they are safe-haven flows that respond to geopolitical tensions and of course different paces of monetary tightening,” he said.

Yellen also dismissed concerns about some of the market turmoil and volatility in recent weeks.

“We are closely monitoring currency movements and their impacts. And we continue to think that the markets are doing quite well and are generally appropriate given the underlying differences between countries and political and economic situations,” he said.

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

additional reporting by Sam Fleming in Brussels

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