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Senate Republicans Seek to Void IMF Money in Ukraine Aid

March 25, 2014

A partisan dispute over the International Monetary Fund will be at the center of the U.S. Senate debate this week on legislation providing aid to Ukraine and imposing sanctions on Russia.

After a Senate vote yesterday, 78-17, to advance the bill, Republicans say they’ll try to strike language boosting the U.S. share, or quota, at the IMF and implementing 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, who said he would offer an amendment to eliminate the language. “Hopefully we can strip that out so that we have as singular a voice coming from Congress as possible.”

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The IMF provision has slowed Senate consideration of legislation that otherwise has drawn broad bipartisan support. The Senate measure, which Majority Leader Harry Reid said yesterday he wants to complete this week, would provide about $1 billion in loan guarantees and authorize $150 million in direct assistance to Ukraine.

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.

Significantly, 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.

A Snapshot of Ukraine's Past and Future

Delay “sends a very weak message” to Moscow, said Reid, who 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 President Barack Obama.

Senate Votes

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.”

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.”

Asset Recovery

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

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.

Codify Sanctions

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

House lawmakers could vote as soon as 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.

That measure would codify sanctions already announced by Obama and 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 Michael Shepard


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