Ms Yellen, who had been appointed as the chair of the council of economic advisers under Bill Clinton, also revealed on Wednesday that while the US does not have the legal authority, talks with American partners over ways to force Moscow to foot the bill for Ukraine’s post-war reconstruction are starting. European officials had suggested the EU, United States and its allies seize up to $300billion (£2.43billlion) from Russia’s central bank foreign currency assets which have been frozen by sanctions.
Such sanctions are currently held abroad but remain under Russian ownership.
Ms Yellen said: “While we’re beginning to look at this, it would not be legal now in the United States for the government to seize those” assets.
She added: “It’s not something that is legally permissible in the United States.”
Despite conceding there was no legal right, she also said it is likely that the special licence which allows Russia to make payments to US bondholders will not be extended after its expiration date next week.
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The licence expires on May 25, with the next major payment due that day.
This could leave Russian officials with little time to act as the Kremlin potentially faces its first external debt default since the 1917 Russian revolution.
The so-called Group of Seven finance ministers in Washington are said to be prioritising issues in Ukraine during this week’s meeting.
Ms Yellen has even called for an increase in financial support for the ex-Soviet state after the World Bank estimated it had suffered $4billion (£3.24billion) in weekly physical damage.
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Ms Yellen told reporters ahead of the meeting: “I think it’s very natural that given the enormous destruction in Ukraine, and huge rebuilding costs that they will face, that we will look to Russia to help pay at least a portion of the price that will be involved.”
She later added: “There’s not been a final decision on that, but I think it’s unlikely that it would continue.
“If Russia is unable to find a way to make these payments, and they technically default on their debt, I don’t think that really represents a significant change in Russia’s situation.
“They’re already cut off from global capital markets.”