Senate Reaches Deal on Ukraine Aid Omitting IMF Provision

U.S. senators reached agreement on legislation to aid Ukraine after Majority Leader Harry Reid abandoned a provision opposed by Republicans that would have boosted the International Monetary Fund.

The deal sets up a March 27 vote on final passage, Reid said on the Senate floor tonight. The Nevada Democrat told reporters earlier today that he would drop language boosting the U.S. share, or quota, for the IMF and implementing a 2010 international accord giving rising economies more voice.

“The main thing is to get the aid now,” Reid, a Nevada Democrat, told reporters. He said omitting the provision should speed final passage of the Ukraine assistance package.

Republican opposition to the IMF funding change sought by the Obama administration has slowed Senate consideration of a bill that would combines aid to Ukraine with sanctions for Russian officials. The measure calls or about $1 billion in loan guarantees and authorizes $150 million in direct assistance to Ukraine following Russia’s annexation of Crimea and massing of troops on the Ukrainian border.

The Senate’s top Republican, Mitch McConnell of Kentucky, told reporters that dropping the IMF provision “would be a step in the right direction.” Earlier today, he warned that Democrats’ insistence on the language would keep the measure from reaching President Barack Obama’s desk, even with bipartisan support.

‘Cannot Pass’

“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 Treasury Department, which has pressed for the IMF funding revision, lamented Senate Democrats’ decision.

“We are deeply disappointed by the news that Republican opposition has forced the Senate to remove the IMF quota and governance reforms from the Ukraine assistance package,” Treasury spokeswoman Holly Shulman said in a statement. “These reforms, which require no new U.S. financial commitment to the IMF, are critical to preserving the United States’ leadership and influence at the IMF.”

IMF Managing Director Christine Lagarde had 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.”

Boehner Stance

Senate Democrats, who control 55 seats in the 100-member chamber, have enough votes to preserve the IMF language, and doing so would set up a showdown with the Republican-led House.

House Speaker John Boehner today chided the Senate for adding the IMF quota provision to the Ukraine bill. “All it’s going to do is slow the political process down,” the Ohio Republican told reporters.

Boehner spokesman Michael Steel said House Republican leaders would welcome news that Democrats would abandon their IMF funding push.

“As the Speaker has said all along, that is the only way to get Ukraine the help it needs as quickly as possible,” Steel said in an e-mailed statement.

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.

Gas Exports

“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.

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.

House Measure

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

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,” Boehner told reporters today.

The House Foreign Affairs Committee approved the measure today by a voice vote.

“This bill ramps up pressure on Putin and his accomplices who have played key roles in Russia’s aggression,” said Representative Ed Royce, a California Republican and the panel’s chairman.

Democrats on the committee didn’t press to include the IMF funding changes.

Codify Sanctions

The new House measure 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.

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

Before it's here, it's on the Bloomberg Terminal.