US close to sanctions on Russia

IMF ISSUE::Democrats wanted to uphold IMF reforms, but Republicans said the changes would expose US taxpayers if bailouts became necessary in other nations

AP, WASHINGTON

Thu, Mar 27, 2014 - Page 7

The US Senate is on track to approve sanctions against Russia and aid for Ukraine after Democrats withdrew a provision that was blocking the US Congress from issuing a sharp response to Russian President Vladimir Putin’s military intervention in Crimea.

A Senate vote was set for today. The US House Foreign Affairs Committee has approved its version of the measure, but it was unclear whether a final bill could be sent to US President Barack Obama before the end of the week.

Democrats backed down on Tuesday and stripped IMF reform language from the bill, which had stalled its progress. With tens of thousands of Russian troops massed on Ukraine’s eastern border, Senate Democrats decided it was more important to denounce Russia, codify sanctions against Putin’s inner circle and support Ukraine rather than push right now for the IMF changes.

Democrats wanted the Ukraine legislation to include provisions to enhance the IMF’s lending capacity, but Republicans were opposed. And since more than two weeks have passed since Russia’s incursion into Crimea, Democrats decided it was important to move quickly to provide US$1 billion in loan guarantees to Ukraine and sanction Putin’s inner circle.

Eight Senate Republicans introduced an amendment to the Senate measure to remove the IMF provisions.

US Senate Majority Leader Harry Reid said he strongly supported IMF reform, but the main thing was to get the aid to Ukraine.

“We have to get IMF reform. But we can’t hold up the other,” Reid told reporters on Tuesday. “As much as I think a majority of the Senate would like to have gotten that done with IMF in it, it was headed to nowhere in the House.”

Senator Robert Menendez, chairman of the US Senate Foreign Relations Committee, said he too understood that political reality. In a speech on the Senate floor, Menendez said Democrats and Republicans needed to join together to send a message of support to Ukraine and a message of disapproval to Putin.

“We cannot and should not stand for the violations of international norms that were perpetrated on Crimea by Russia. The world is watching and the world’s superpower cannot be seen as incapable of rising to Russia’s challenge,” Menendez said.

The move signaled a retreat for the Democrats and the Obama administration, which had promoted the IMF provisions.

Dan Pfeiffer, senior counselor to Obama, who is traveling in Europe, denounced Republicans for not backing the IMF changes as part of the Ukraine measure.

“Supporting these reforms would have meant Ukraine could access additional assistance, and it’s unfortunate that Republicans stood in the way,” Pfeiffer said.

IMF managing director Christine Lagarde said she too was disappointed that the reforms were dropped from the Senate measure.

Republicans were happy to see the IMF provisions removed from the Ukrainian aid package.

Republican Senator Ron Johnson said: “By adding the IMF issue to this debate, the administration is choosing to divide Congress, weakening our unified front and delaying this urgent help.”

Republican Senator Mike Lee said: “In choosing to pick this fight with Congress, the administration is signaling to President Putin a real lack of seriousness in actually addressing the Russian government’s conduct.”

As lawmakers debated the issue, Assistant Majority Leader Dick Durbin and Republican Senator John McCain met with Russian Ambassador to the US Sergey Kislyak to discuss the ongoing crisis in Ukraine. Durbin and McCain were in Kiev last week to meet with Ukrainian leaders about the rapidly deteriorating political and security situation in the country.

“The ambassador repeated the same Russian rationalizations and distortions we have heard since President Putin sent his troops and masked gunmen into Crimea,” Durbin said. “We made clear we stood with our allies and the world in condemning this Russian aggression. We stand with Ukraine and all those who seek a democratic future.”

On the House side, the Foreign Affairs Committee passed its own Ukraine aid bill on Tuesday, without any reference to the IMF.

The IMF provisions would have increased the power of emerging countries in the IMF and shifted about US$63 billion from a crisis fund to a general account the lending body could use for economic stabilization operations globally.

Republicans have long spurned the administration’s attempt to ratify the IMF revisions, saying they would increase the exposure of US taxpayers in foreign bailouts. Making the shift now, opponents argue, also would marginally increase Russia’s voting power over the fund’s finances.

The Obama administration and Democrats counter that unless the US approves the new rules, Washington will lose its influence at the IMF and hamper the body’s ability to avert economic meltdowns in places precisely like Ukraine.

The US is the only major country that has yet to sign off on the changes to the IMF.