WASHINGTON (Reuters) – U.S. Treasury Secretary Janet Yellen told Reuters on Friday that the U.S. is looking at further sanctions on “dark fleet” tankers and will not rule out sanctions on Chinese banks as it seeks to reduce Russia’s oil revenue and access to foreign supplies to fuel its war in Ukraine.
Yellen said in an interview that the U.S. and its allies also could consider lowering their $60-per-barrel oil price cap on Russian oil, which prohibits Western insurance and maritime services on cargoes above that level.
The Treasury has already sanctioned individual tankers and their owners for operating above the price cap and can do more in this area, Yellen added, suggesting additional measures in the five weeks before she leaves office.
“There are a number of possibilities here. We don’t preview sanctions, but we’re always looking at oil revenues and if we can find ways to further impair Russian oil revenues, that would, I think, strengthen Ukraine’s hand. That remains on our list,” Yellen said.
Earlier this week, Yellen said softness in the oil market presents an opportunity for more sanctions. Benchmark Brent crude traded at $74.50 per barrel on Friday, down from $85.57 when the $60 cap was set in December 2022.
President Joe Biden’s administration has been racing to shore up support for Ukraine before President-elect Donald Trump takes office on Jan. 20, given the Republican leader’s frequent complaints about the cost of U.S. support for Ukraine.
CHINESE BANK CONCERNS
U.S. Treasury officials continue to have conversations with their Chinese counterparts on efforts to detect financial institution activity that could be aiding transactions related to Russia’s war effort. Yellen said these discussions have been aided by efforts to rebuild U.S.-China economic and financial communications over the past two years.
“I absolutely would not rule out the possibility we would sanction an individual bank if we had the necessary level of … evidence to be able to put sanctions on,” she said. “But we also do have a channel where we’ve been able to discuss specific concerns, and sometimes that could be adequate as well.”
She said warnings to larger Chinese banks have been successful, making them “very wary” of sanctions that would cut them off from dollar-based transactions. In an executive order about a year ago, Biden gave Treasury the authority to levy secondary sanctions on financial institutions that facilitate war-related transactions.
As Russia’s economy becomes more dominated by military production, it is becoming harder to distinguish between strictly commercial and war-related deals.
“Authorities in China recognize that our use of these sanctions would be a serious threat with very adverse consequences,” Yellen said. “They want to trade with Russia, but they do not want their banks sanctioned.”
COMMUNICATION CHANNELS
Yellen said the final meeting of the U.S.-China Financial Working Group will take place next week in the northeast Chinese city of Tianjin, but sanctions will not likely be a major feature. Instead, it will focus on financial stability issues, including “tabletop” exercises on how to deal with potential financial crises.
Yellen said it was important for the Trump administration to have open channels of communications with China, adding: “I think you can’t just have leader-to-leader meetings. The relationship has to be developed at a senior official staff level, and we’ve worked constructively on a lot of things.”
While the dialogue has not changed China’s state-led, export-driven economic model, it has allowed the U.S. to explain actions like application of steep tariffs on electric vehicles.
Asked about a Reuters report this week that Beijing is considering weakening its yuan currency to counteract Trump’s tariff plans, Yellen said China in recent years has been doing “the exact opposite,” pushing up the yuan’s value against the dollar. That assessment was detailed in Treasury’s most recent semi-annual currency report, which found no manipulation by major U.S. trading partners.
She declined to comment on Beijing’s specific currency plans, but said the U.S. Treasury has tools to react strongly to address currency manipulation. Bessent is expected to oversee the Treasury’s next currency report, which is due in April.
“I’m not going to be here, but my guess is that Treasury will continue to push back if it thought that there was currency manipulation,” Yellen said.
Peter Navarro, who is Trump’s designated White House trade adviser, also told Reuters earlier on Friday that Trump’s Treasury Department would not look “fondly” on any attempts by U.S. trading partners to manipulate their currencies.
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