Ukraine Aid Measure Approved With IMF Link House Opposes

The Senate Foreign Relations Committee approved an aid package for Ukraine that will face opposition from Republicans over changes in U.S. funding for the International Monetary Fund.

The Democratic-led panel voted 14-3 today for a bill that would give Ukraine $1 billion in loan guarantees it’s seeking as Russian forces occupy the Crimean peninsula. It also would authorize sanctions against Ukrainians and Russians deemed responsible for corruption and violence.

The measure, which had bipartisan support in the panel, “sends a message to Russia and the world that we support Ukraine,” said Democratic Senator Robert Menendez of New Jersey, the panel’s chairman.

U.S. House Speaker John Boehner earlier today rejected attempts by Democrats and the Obama administration to tie additional funds for the IMF to a Ukraine aid package.

“This IMF money isn’t necessary for dealing with this Ukraine crisis that we see today,” Boehner, an Ohio Republican, told reporters in Washington. House Republicans have resisted proposals to increase funds for the IMF for years.

The IMF overhaul is backed by the Obama administration, chief executive officers of major U.S. companies and Republican former secretaries of state Henry Kissinger and Condoleezza Rice, who have said funding the IMF would help Ukraine.

Senate Timing

Ukraine’s prime minister, Arseniy Yatsenyuk, went to the Capitol tonight after meetings in Washington with President Barack Obama and Secretary of State John Kerry. Speaking to reporters after he met in a closed-door session with Foreign Relations Committee members, Yatsenyuk said he wasn’t concerned about the time that it might take for Congress to approve the requested economic assistance.

“It always takes time to make good things,” he said.

He called the U.S. pledge of $1 billion in loan guarantees “the first real and concrete step how to stabilize the situation in my country, and we praise it.”

While Senate Majority Leader Harry Reid told reporters he hoped the measure approved today can be taken up by the full Senate tomorrow, Adam Jentleson, a spokesman for the Nevada Democrat, said the legislation may not be considered before members leave for a break until March 24. The Senate may depart as soon as tomorrow.

Three Republicans voted against the Senate measure in the committee: Senators James Risch of Idaho, John Barrasso of Wyoming and Rand Paul of Kentucky.

IMF Funding

At the center of the dispute was a provision that would restructure how the U.S. contributes funding to the International Monetary Fund, which is heading up the economic relief effort for Ukraine.

The measure would transfer some U.S. funding from a temporary account used for emergencies to the IMF’s core source of funding, according to a Congressional Research Service report. The share of U.S. voting power at the IMF would decrease slightly, although the U.S. would maintain its veto power over major policy decisions, the service said.

Paul pushed to eliminate the IMF provision, saying he worried it would give Russia more voting power over the group’s decisions. He was alone in the committee in speaking against the loan guarantees as well, saying they would only go to pay some of Ukraine’s debt to Russia.

‘Reformed IMF’

Kerry told a House Appropriations subcommittee today that the IMF funds are a necessary part of aid to Ukraine.

“It’s only through the IMF, a reformed IMF, that Ukraine is going to get the help it needs to stand on its own two feet,” Kerry said.

The House passed a Ukraine aid plan March 6 that would allow about $1 billion in loan guarantees to the fledgling Ukraine government. That measure, H.R 4152, didn’t include the IMF funding.

Sanctions against former and current Ukrainian officials as well as Russian individuals would take the form of blocking assets in the U.S.; exclusion from the U.S. and revocations of U.S. visas; and penalties under the U.S. International Emergency Economic Powers Act.

The Senate bill would require the U.S. government to assist the Ukrainian government in the recovery of assets secured through acts of corruption by former president Viktor Yanukovych, his family and other government officials.

The legislation includes rescissions of $315 million in unexpended State Department and Defense Department money as a way to offset the money that would go to the IMF.

‘First Responder’

Obama’s fiscal 2015 budget plan, sent to Congress March 4, would boost the U.S. share, or quota, at the Washington-based IMF by shifting about $63 billion from an existing credit line.

Treasury Secretary Jacob J. Lew told the Senate Budget Committee today that an international aid package for Ukraine may be $15 billion or more and that the International Monetary Fund needs to be the “first responder.”

A group of 32 former senior U.S. officials, including Kissinger, Rice, former Federal Reserve Chairman Alan Greenspan, former World Bank President Robert Zoellick and former Treasury Secretaries Hank Paulson, Paul O’Neill and Timothy Geithner wrote a joint letter to congressional leaders supporting the IMF quota legislation.

“The immediate importance of a strong IMF role for countries in crisis is apparent now in Ukraine, which seeks help from the U.S. and IMF to maintain its independence and economic health, and to reduce its energy dependence on Russia,” they wrote in the letter dated today and organized by the Bretton Woods Committee.

Cede ‘Influence’

An organization of CEOs also urged the Senate to back the IMF provision, in a letter to leaders of the Senate Foreign Relations Committee.

“If Congress fails to act, it will cede U.S. influence and leverage in the IMF and international financial system to China, India, Brazil, and other countries, as well as, ironically, Russia,” John Engler, president of the Business Roundtable, wrote on behalf of more than 200 members in a March 10 letter. Engler is the former Republican governor of Michigan.

House Republicans in January rejected White House requests to include the IMF quota changes in a government spending measure.

Boehner said the Senate should “take up the House-passed loan guarantee package and they could move that today.”

To contact the reporters on this story: Derek Wallbank in Washington at dwallbank@bloomberg.net; David Lerman in Washington at dlerman1@bloomberg.net

To contact the editors responsible for this story: Jodi Schneider at jschneider50@bloomberg.net Michael Shepard

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