Created: 04/01/2014 3:58 PM KSTP.com
By: Scott Theisen
Congress was near passage Tuesday of a bill to provide $1 billion in loan guarantees to cash-poor Ukraine and take punitive measures against Russia for its brazen annexation of part of the former Soviet satellite nation. Once passed by the House, it would be sent to President Barack Obama.
Russia's incursion into Crimea has forged a deep rift between Moscow and Washington and the bill, which has bipartisan support, is a way for Congress to denounce Russia's aggressive move and express support for Kiev.
If signed into law, the loan guarantees would help stabilize Ukraine's economy. The bill authorizes $50 million to improve democratic governance and rule of law and fight corruption; support fair elections; and bolster civil society organizations.
The bill authorizes an additional $100 million to beef up security cooperation among the United States, European Union and countries in central and eastern Europe and further authorizes the president to provide defense help and additional security assistance to Ukraine and other countries in the region.
Targeting Russia, the bill would supplement sanctions the Obama administration has already taken by freezing assets and revoking visas of Russian officials and their associates who are complicit in or responsible for significant corruption in Ukraine. The measure also would sanction those who are responsible for human rights abuses against anti-government protesters and the undermining of the peace and sovereignty of Ukraine.
The U.S. has warned that further Russian incursions could result in broader penalties targeting the Russian economy, including its robust energy sector. But administration officials acknowledge that American sanctions wouldn't have the same kind of bite as European penalties, given Europe's deeper economic ties with Russia.
A separate bill expected to clear Congress would provide money to step up Voice of America and Radio Free Europe/Radio Liberty broadcasts to counter pro-Russian broadcasts in the area. Rep. Ed Royce, R-Calif., chairman of the House Foreign Affairs Committee, says Moscow is using propaganda to sow confusion and fear in the Ukraine.
Ukraine, a nation of 46 million people, has been struggling to regain stability since pro-Russia President Viktor Yanukovych was ousted in February. He was booted after months of protests sparked by his decision to back away from closer relations with the European Union and turn toward Russia.
Since then, Russia has moved thousands of troops to areas near the Ukrainian border, sparking fears in the U.S. and Europe that Putin could make a play for more territory.
In Kiev, Ukraine Prime Minister Arseniy Yatsenyuk has warned his country is on the brink of economic and financial bankruptcy. Ukraine's Finance Ministry has said it needs $35 billion over the next two years to avoid default.
The International Monetary Fund last week pledged up to $18 billion in loans, hinged on structural reforms. The reforms demanded by the IMF, which include raising taxes, freezing the minimum wage and hiking energy prices, will hit households hard and are likely to strain the interim government's tenuous hold on power. Other donors, including the European Union and Japan, have already pledged further aid to Ukraine. The total amount of international assistance will be about $27 billion over the next two years.
Steven Pifer, a former U.S. ambassador to Ukraine who is now an analyst at the Brookings Institution think tank in Washington, said the Ukrainian economy is in deep trouble, and every $1 billion will help.
The IMF program, which will total $14 billion to $18 billion over two years, will be distributed in tranches as Ukraine implements reforms, he said. The IMF board still needs to approve the money, so "the U.S. loan guarantees will help Kiev bridge the time from now until the IMF funding begins to flow," Pifer said.
Ariel Cohen, an expert on Russian and Eurasian affairs at the Heritage Foundation in Washington, said the $1 billion the U.S. is providing in loan guarantees, coupled with the IMF and EU pledges, is a start to help Ukraine.
"But it doesn't resolve the problem, which is that Ukraine does not generate enough growth and income to plug the budgetary holes created by energy dependence on Russia," Cohen said.
On Tuesday, Moscow sharply hiked the price for natural gas to Ukraine and threatened to reclaim billions in previous discounts, raising the heat on its cash-strapped government.
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