Russia must choose between saving its economy or funding its invasion, Yellen says

Treasury Secretary Janet Yellen.

Al Drago/Associated Press

• Russia has to choose between saving its economy and continuing its invasion, Tres. Sec. Janet Yellen said.
• Yellen's deputy indicated on Tuesday the next sanctions will focus on starving the Russian military of cash.
• Yellen also hinted that countries ignoring sanctions could face retaliation from the West.

The West's next set of sanctions seeks to force Russian President Vladimir Putin into a difficult choice: Keep spending on his invasion of Ukraine or shift cash to buoy Russia's struggling economy.

That was the strategy laid out by Treasury Secretary Janet Yellen in Wednesday remarks at the Atlantic Council. Russia's invasion "predestined" its removal from the global financial system, and the West must stay united to keep economic pressure on Putin, Yellen said.

"The Kremlin will be forced to choose between propping up its economy and funding the continuation of Putin's brutal war," she added.

Yellen's deputy, Wally Adeyemo, detailed similar aims in a Tuesday interview with the Associated Press. The deputy Treasury secretary said the next punitive measures can starve the Russian "war machine" of much-needed funding and shift Russia's focus from the invasion toward keeping its own economy intact.

The US and allies are eyeing measures targeting supply chains critical to Russia's armed forces, as well as "military devices" built to "project power" beyond Ukraine, Adeyemo told AP.

The Russian economy has already been severely dented by sanctions announced over the past six weeks. While the ruble has recovered much of the value lost through March, it remains lower than before the invasion. Sanctions targeting Russia's financial sector have effectively frozen all business with the West, as well as Russian elites' own dealings.

The World Bank forecast in a Sunday report that Russia has already fallen into a deep recession, and that the country's economy will shrink by 11.2% by the end of 2022.

Yellen also issued a stern warning to countries that haven't yet sided against Russia. India has continued to buy Russian oil, while China hasn't reneged on its own long-lasting contracts to do the same. Those sales have propped up the Russian government's income, with one Ukrainian government official claiming on Sunday that Russia is raking in $1 billion a day from its oil trade alone.

Countries that are "sitting on the fence" risk undermining the international order, world peace, and economic prosperity, Yellen said Wednesday before hinting that such ambivalence won't go unnoticed.

"The unified coalition of sanctioning countries will not be indifferent to actions that undermine the sanctions we've put in place," she said.

China is the biggest economic power that has yet to take a side in the conflict. While the country's government hasn't explicitly severed ties with Russia, it hasn't backed its invasion either, and Reuters reported on April 6 that China's oil refiners have backed off from making new orders of Russian crude.

China's wavering places the country in a "pivotal role" as the West unites against Russia, Yellen said. It will be harder to separate economic issues from national security as the invasion pushes forward, and the world's attitude toward China depends on how the country reacts to Russia, the West's sanctions, and the Ukraine conflict, she added.

"China has recently affirmed a special relationship with Russia," Yellen said. "I fervently hope that China will make something positive of this relationship and help to end this war."

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