Reid Considers Dropping IMF Provision in Ukraine Aid Bill

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A boy holds a toy gun and wears a helmet reading "Stop Russia," as he stands in Independence Square during a rally in Kiev, on March 23, 2014. Close

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Photographer: Sergei Supinsky/AFP via Getty Images

A boy holds a toy gun and wears a helmet reading "Stop Russia," as he stands in Independence Square during a rally in Kiev, on March 23, 2014.

U.S. Senate Majority Leader Harry Reid is considering dropping language boosting the International Monetary Fund from a measure providing aid to Ukraine, according to two Senate Democratic aides.

The move would speed consideration of the measure, which has been slowed by a partisan dispute over the IMF provision, said the aides, who asked for anonymity and weren’t authorized to speak publicly about leadership tactics. Besides providing aid to the Ukraine, the measure would impose sanctions on Russia.

Earlier today, the Senate’s top Republican, Mitch McConnell of Kentucky, warned that Democrats’ insistence on the IMF language would prevent the measure from reaching President Barack Obama’s desk, even with bipartisan support.

“This bill cannot pass the House or become law in its current form -- it must be amended,” McConnell said. “In order for it to become law, the controversial IMF provision must be removed.”

The IMF provision has slowed Senate consideration of the legislation. The bill, which Reid said he hopes could be completed as soon as today, would provide about $1 billion in loan guarantees and authorize $150 million in direct assistance to Ukraine.

Complete ‘Quickly’

“One way or another, we need to get it done as quickly as possible,” Reid said of the bill.

After the Senate voted 78-17 yesterday to advance the bill, Republicans said they would try to strike language boosting the U.S. share, or quota, for the IMF and implement a 2010 international agreement giving rising economies more voice.

“If the IMF reform is in there, you’re not going to have that strong show of unity from the Congress,” said Senator Ron Johnson, a Wisconsin Republican. “Hopefully, we can strip that out so that we have as singular a voice coming from Congress as possible.”

Senators could begin considering amendments as soon as today. In addition to removing the IMF provision, Republicans will seek to boost U.S. natural gas exports to countries that are members of the North Atlantic Treaty Organization.

‘Russia’s Influence’

Senator Ted Cruz, a Texas Republican, told reporters yesterday that the IMF changes Democrats are seeking “would decrease America’s influence at the IMF and perversely would increase Russia’s influence in the IMF.”

“These provisions have no business in a Ukraine aid package,” Cruz said, adding that taking out the IMF language would be the “easiest way” to quickly pass the legislation.

Cruz said he wouldn’t try to block a final vote on the underlying bill as long as Republicans are given a vote on their amendment to remove the IMF provision.

Delay “sends a very weak message” to Moscow, said Reid of Nevada, who yesterday blamed Republicans for slowing action, noting that Russia moved to annex Crimea while Congress was on a week-long break that ended yesterday.

“It’s impossible to know whether events would have unfolded differently if the United States had responded to this Russian aggression with a strong, unified voice, which we did not do,” Reid said.

A Ukraine aid bill passed by the House on March 6, H.R. 4152, didn’t include the IMF provision sought by Obama.

House Plans

House lawmakers plan to vote this week on another bill that would increase U.S. sanctions on Russia, including additional asset freezes and visa bans on senior officials and corporations.

“The House has acted once already, we’re going to act again this week to help the Ukrainians and to put pressure on President Putin,” House Speaker John Boehner of Ohio told reporters today.

Senate Democrats, who control 55 seats in the 100-member chamber, have the votes to preserve the IMF language, setting up a showdown with the Republican-led House. The Obama administration yesterday endorsed the Senate measure’s handling of IMF funding.

“The United States has an essential responsibility to lead the international effort to support Ukraine’s reforms at this time of geopolitical challenges, and we need to fulfill our international commitments,” Treasury Department spokeswoman Holly Shulman said in an e-mailed statement. “We will continue to work with Congress to get this done as quickly as possible.”

‘Economic Stability’

IMF Managing Director Christine Lagarde urged Congress to complete work on legislation that would boost the U.S. commitment to the fund, saying in a Wall Street Journal opinion article that such a move would help “promote global economic stability and prosperity into the future.”

The Senate Democrats’ bill, S. 2124, would require Obama to impose sanctions against Ukrainians and Russians deemed responsible for corruption and violence. Russian officials, as well as their close associates or family members, also could be subject to sanctions, which could include blocking access to assets held in the U.S. and prohibiting travel to the U.S.

The legislation 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.

Bipartisan Vote

The Senate Foreign Relations Committee approved the measure on March 12 by a bipartisan vote of 14-3 with Republicans John Barrasso of Wyoming, Rand Paul of Kentucky and James Risch of Idaho voting against it in part to protest the IMF language.

House Republicans are insisting that a one-year delay in Internal Revenue Service rules governing political activity by some nonprofit groups be paired with the changes to IMF financing that Democrats want.

Reid has vowed to block Republicans from extracting a delay in the IRS rule in exchange for the IMF money.

Like the Senate plan, the measure the House is planning to consider this week would codify sanctions already announced by Obama. It would encourage imposing more penalties on Russians with “significant influence over the formation and implementation of Russian foreign policy” involving Ukraine, according to the bill’s text.

The bill, H.R. 4278, includes additional economic assistance for Ukraine and would signal U.S. plans to increase natural gas exports. Republicans have said such a move eventually would reduce Russia’s leverage over other European nations that depend on its gas exports.

To contact the reporter on this story: Kathleen Hunter in Washington at khunter9@bloomberg.net

To contact the editors responsible for this story: Jodi Schneider at jschneider50@bloomberg.net Kathleen Hunter, Justin Blum

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