Bloomberg News

Senate Poised for Break Without Ukraine Aid Plan Action

March 13, 2014

Senate Majority Leader Harry Reid vowed to block House Republicans from using a Ukraine aid package to delay U.S. Internal Revenue Service rules governing political activity by some nonprofit groups.

“This has been floating around the Senate for a while,” Reid, a Nevada Democrat, said today. He added that it was hard for him to “comprehend how, with a clear conscience” Republicans would seek to link the IRS rule delay to the aid.

House Republicans are insisting that a one-year delay in the IRS rule be paired with changes in U.S. financing for the International Monetary Fund that Democrats are seeking, said a House Republican aide speaking on condition of anonymity.

New York Senator Charles Schumer, the chamber’s third-ranking Democrat, told reporters today that House Republican leaders made the demand directly to Senate leaders. A spokesman for House Speaker John Boehner declined to comment publicly.

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“I know for a fact that they talked to the leadership about it,” Schumer said. “This is so deleterious to our political system. There should not be a delay.”

Republicans are reviving a failed effort to link language delaying the proposed IRS rule with the IMF funding increase. Both provisions eventually were dropped from legislation to fund the U.S. government through Sept. 30.

A House Republican leadership aide speaking on condition of anonymity said the latest effort was consistent was the previous attempt. The Republican leaders say the proposed IRS rule would wrongly suppress free speech.

Slowing Action

Sparring over the IMF provision -- and now over the push to delay the IRS rule -- is slowing action on Ukraine aid. The Senate is poised to start a week-long break today without acting on a bill approved yesterday by the Senate Foreign Relations Committee to allow about $1 billion in U.S. loan guarantees sought by Ukraine as Russian forces occupy the Crimean peninsula.

Senate action on the aid package is “more likely when we return” after next week’s recess because “we need help from the Republican side,” second-ranking Senate Democrat Dick Durbin of Illinois told reporters today.

Boehner, an Ohio Republican, today called on the Senate to pass the House version of the Ukraine aide bill before leaving for the break. The IMF money “has nothing to do with Ukraine,” he said. House Republicans have resisted proposals to increase funds for the IMF for years.

Bipartisan Delegation

With both chambers out of session next week, Senator John McCain will lead a bipartisan delegation of eight senators to Ukraine for meetings with the interim government and other stakeholders, a Senate aide said yesterday. McCain, an Arizona Republican, has said he would be disappointed if the Senate didn’t act on Ukraine aid this week.

Ukraine faces $3.6 billion in debt repayments including interest through the end of June, according to data compiled by Bloomberg.

While the biggest hurdle is a $1 billion bond maturing on June 4, there are also payments due to the IMF, including the equivalent of about $670 million on April 30. Ukraine’s foreign repayment needs will peak in May, June and August, Finance Minister Oleksandr Shlapak said in Kiev on March 5.

Durbin said acting Ukraine Prime Minister Arseniy Yatsenyuk left a meeting with the Senate Foreign Relations Committee last night with “our assurance that we take this up as soon as we come back.” Boehner and House Minority Leader Nancy Pelosi met with Yatsenyuk today.

Condemning ‘Aggression’

The Senate on March 11 adopted a resolution “condemning illegal Russian aggression in Ukraine.” The bill approved yesterday by the foreign relations panel goes further, allowing the loan guarantee and authorizing sanctions against Ukrainians and Russians deemed responsible for corruption and violence.

The measure, S. 2124, also would restructure how the U.S. contributes financing for the IMF, which is leading the economic relief effort for Ukraine.

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

Disagreements over the IMF provision in the Senate bill may lead Congress to pass the Ukraine aid package without it, Pelosi, a California Democrat, told reporters today. Still, without the IMF provision, “we are falling short of what we really can do to help the people of the Ukraine,” she said.

Rand Paul

Senator Rand Paul, a Kentucky Republican, pushed yesterday to eliminate the IMF language, saying he was concerned it would give Russia more voting power over the group’s decisions.

Paul was among three Republicans who voted against the Senate measure in the committee. Senators James Risch of Idaho and John Barrasso of Wyoming also voted “no.”

The Democratic proposal would transfer some U.S. funding from a temporary account used for emergencies to the IMF’s core source of financing, 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.

Secretary of State John Kerry told a House Appropriations subcommittee yesterday 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.

House leaders have offered to work with the Obama administration on a separate package of proposed IMF changes, said House Foreign Affairs Committee Chairman Ed Royce.

‘Not’ Time

“While we are moving a bill through on Ukraine and trying to convince President Putin not to move on eastern Ukraine, now is not the time for us to get into disagreements about the specific nature about how we reform the IMF,” Royce, a California Republican, told reporters.

Treasury Secretary Jacob J. Lew met with Yatsenyuk today, and the two agreed that passing the IMF legislation is needed to maximize the international community’s support to Ukraine, Treasury said in an e-mailed statement.

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 Laurie Asseo


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