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U.S.-EU Ready to Help Cash-Strapped Ukraine as President Ousted

Ukrainian & EU flags Outside White House
Ukrainian and European Union flags fly in front of the White House during a protest against ousted Ukrainian president Viktor Yanukovych in Washington D.C. on Feb. 23, 2014. Photographer: Nicholas Kamm/AFP/Getty Images

Feb. 24 (Bloomberg) -- The U.S., Europe and the U.K. said they stand ready to help Ukraine following its president’s ouster, days after Standard & Poor’s said the former Soviet republic risks default.

“We are here ready to help just as soon as there is someone at the end of the telephone,” U.K. Chancellor of the Exchequer George Osborne said in an interview yesterday in Sydney. “We should be there with a checkbook to help the people of Ukraine rebuild their country.”

Ukraine, a key east-west energy route between Russia and Europe, spiraled into crisis in November when protesters took to the streets to oppose President Viktor Yanukovych’s rejection of a deal to deepen ties with the European Union. Violence crested last week when at least 82 protesters and police officers died in fighting before a peace deal and the leader’s flight from Kiev.

S&P cut Ukraine’s credit rating to CCC on Feb. 21, eight levels below investment grade, saying it risks default without “significantly favorable changes.” The Black Sea nation is grappling with a record current-account deficit and has seen foreign reserves plunge 28 percent in the past year to $17.8 billion at the end of January, the lowest level since 2006.

IMF Ready

The International Monetary Fund “will be ready to engage,” Managing Director Christine Lagarde said in an interview in Sydney after a meeting of Group of 20 finance ministers and central bankers. “If it needs policy advice, financial support and wants to actually undertake a reform of its economy” the IMF will help, she said.

The dispute between Yanukovych and his detractors polarized sentiment in the country of 45 million, largely between western regions bordering ex-communist EU states Poland, Slovakia, Hungary and Romania and those in the south and east that are home to more Russian speakers and ethnic Russians.

German Finance Minister Wolfgang Schaeuble said after a speech yesterday in Sydney that international relations function more effectively when Russia is included.

“Ukraine is between Russia and Europe,” he said in response to an audience question from the German-Australian Chamber of Industry and Commerce in Sydney. “We can see some signs that even in this time, when most observers became more and more critical in relation to Russia, and for a lot of reasons, it’s possible that we could find some cooperation with Russia to treat the Ukrainian problem.”

Lew, Siluanov

U.S. Treasury Secretary Jacob J. Lew and Russian Finance Minister Anton Siluanov agreed on the importance of promoting economic and financial stability in Ukraine and the need for reforms that could be supported by an IMF program, according to the Treasury Department.

“There needs to be stability in the Ukraine,” Lew told reporters in Sydney yesterday, adding he’d had a “very good conversation” with Siluanov.

Lew spoke with Arseniy Yatsenyuk, leader of ex-Premier Yulia Tymoshenko’s Batkivshchyna party, and encouraged Ukraine to begin discussions with the IMF as quickly as possible, the Treasury Department said.

Ukraine’s parliament approved a motion two days ago to remove Yanukovych as president, a day after an EU-brokered deal with the opposition to end the bloodiest episode of the country’s post-World War II history. Tymoshenko was released from prison at the weekend.

EU Ready

EU Economic and Monetary Affairs Commissioner Olli Rehn said the bloc was “ready to engage in substantial financial assistance” for Ukraine. He told reporters in Sydney that aid would be available once a “peaceful, political solution based on democratic principles” had been achieved.

Yanukovych was removed in a 328-0 vote in the 450-seat chamber. As protesters took control of central Kiev and flooded into his luxury estate, Yanukovych said in a speech from an undisclosed location that attempts to remove him from power were a “coup d’etat.”

The peace agreement, signed on Feb. 21 after all-night talks in Kiev with EU foreign ministers, envisioned a national-unity government within 10 days. Lawmakers approved a return to the 2004 constitution, curbing presidential powers.

Polish Foreign Minister Radoslaw Sikorski, who helped negotiate the EU deal signed by Yanukovych and the opposition, said there was “no coup in Kiev,” and that parliament is acting legally. Yanukovych had said in a statement published on his presidential website that he wouldn’t resign and deemed all of the new acts illegal.

Russian Aid

The crisis erupted Nov. 21, when Yanukovych rejected an EU integration pact and opted instead for $15 billion in Russian aid. Russia has halted the bailout for its neighbor because of the unrest. Talks on resumed financing may continue only after a new government is formed, RIA Novosti reported yesterday, citing Siluanov in Sydney.

“We cannot stay deaf and blind to this collapse that is happening in Ukraine,” French Finance Minister Pierre Moscovici told reporters in Sydney. “We agreed that economies in transition, and this is the case of Ukraine, can and must count on the support of the IMF to define and set a reform agenda.”

To contact the reporters on this story: Svenja O’Donnell in Sydney at sodonnell@bloomberg.net; Michael Heath in Sydney at mheath1@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net

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