WASHINGTON – Sen. John Kennedy (R-La.) today joined Sen. Bill Hagerty (R-Tenn.), Rep. French Hill (R-Ark.) and more than 30 other lawmakers in urging Treasury Secretary Janet Yellen to advocate that the International Monetary Fund (IMF) prevent member countries from facilitating exchanges of Russia’s Special Drawing Rights (SDRs). The lawmakers also oppose any additional SDR allocations that would bolster Russia’s reserves as it wages a war of aggression against Ukraine.
“The hostile invasion of Ukraine this week demonstrates why the IMF should have never approved its latest $650 billion general allocation of SDRs in August 2021. As Republicans have repeatedly raised, general SDR allocations are not targeted and have no conditions on what the SDRs can be used for,” the lawmakers wrote.
“The Biden Administration’s support for the IMF’s $650 billion general allocation, of which more than $17 billion went to Russia, ran counter to U.S. sanctions against Moscow even before the invasion of Ukraine. We cannot allow these reserve assets to help the regime withstand the latest sanctions announced by the President, let alone offer additional billions through further allocations,” continued the lawmakers.
“As the largest shareholder of the IMF, the United States has a responsibility to ensure that the Fund is not misused to support Russia’s warmongering in Ukraine. We urge you to take all necessary measures to prevent this,” they concluded.
The IMF created the SDR as an international reserve asset to supplement IMF member countries’ official reserves. The IMF distributes these assets to member countries based on each country’s IMF quota, which depends on its size relative to the global economy. Member countries receive SDRs and can exchange them for U.S. dollars or for the currencies of other IMF members.
In addition to this letter, Kennedy introduced the No Dollars for Dictators Act in June 2021 to prohibit the IMF’s SDR allocations from going to perpetrators of genocide and state sponsors of terrorism unless Congress authorizes the allocation.
The lawmakers also directed the letter to Acting U.S. Executive Director of the IMF Elizabeth Shortino.
The IMF distributes SDRs according to each country’s economic standing in the global economy.
While some have claimed that SDRs offer the U.S. a no-cost way to assist poor countries, this is demonstrably false. The $650 billion IMF allocation made in August 2021 will require the U.S. to issue debt in order to cover loans issued through SDRs. The U.S. will have to pay interest on such debt, and that interest will exceed any interest that the U.S. may receive on the loans it issues.
There is no requirement that countries—including Russia, China and Iran—that receive loans from the U.S. through SDRs ever repay the principal. As a result, the financial burden of these loans will fall on the U.S. taxpayer.
The letter is available here.