Yellen: OPEC production cuts will hurt economy

Treasury Secretary Janet Yellen in a new interview expressed worry that OPEC+ countries’ decision to cut oil production will hurt the global economy, especially in developing countries.

“I think OPEC’s decision is unhelpful and unwise — it’s uncertain what impact it will end up having, but certainly, it’s something that, to me, did not seem appropriate, under the circumstances we face,” Yellen told the Financial Times. “We’re very worried about developing countries and the problems they face.”

The oil-exporting alliance, which includes the 13 OPEC nations and 11 non-members including Russia, made the production cut announcement last Wednesday.

The move was a large blow to President Biden, who visited oil-rich Saudi Arabia in a July trip to appeal to Saudi Crown Prince Mohammed bin Salman. 

Biden faced criticism from some over the trip given Saudi Arabia’s human rights record, namely the death of journalist and Saudi dissident Jamal Khashoggi, and Riyadh announced a production increase following Biden’s visit that was smaller than hoped for by his administration.

Yellen declined to outline to the Financial Times any steps U.S. officials would take to counter OPEC+’s production cut, which threatens to cause an increase in domestic gas prices.

The cut has led some lawmakers to propose changes to the U.S.-Saudi military relationship.

“The president has been focused for a lot of time on exploring all available options to try to bring [oil prices] down,” Yellen said.

The U.S. and other G7 countries have looked to cap the price of Russian oil exports by Dec. 5 to stymie a source of financing for Moscow’s invasion of Ukraine, and diplomats are still working to finalize a deal, namely the specific maximum price.

But the OPEC+ cut could boost price levels and improve Russia’s oil exporting revenue, providing a new obstacle for the group of wealthy democracies’ attempts to weaken Moscow’s financial position.

“Holding down prices is something that’s particularly helpful to developing countries that are suffering from high energy prices,” Yellen said.

The Treasury secretary, speaking days before the International Monetary Fund and World Bank’s annual meetings, told the Financial Times she hopes U.S. allies will step up their financial support of Ukraine.

“A number of countries have pledged significant economic assistance, but simply haven’t quite gotten around to dispersing it,” she told the outlet. “The pace of transferring money to Ukraine is far too slow. There are commitments, but the money needs to be deployed.” 

U.S. lawmakers approved an additional $12.3 billion for Ukraine in a continuing resolution that funds the federal government through mid-December, adding to tens of billions of previously approved funding.

The Biden administration has repeatedly released weapons packages for the war-torn country under presidential drawdown authority, most recently unveiling a $625 million security package last Tuesday that includes more High Mobility Rocket Artillery Systems (HIMARS).