How Financing Aid For Ukraine Became A Political Grudge Match

CREDIT: AP Photo/J. Scott Applewhite

Senate Foreign Relations Committee Chairman Bob Menendez (D-NJ), left, and Ranking Member Bob Corker (R-TN)

In theory this should have been an easy bit of bipartisanship, something a divided Washington could agree upon: Ukraine needs financial assistance after the ouster of its pro-Russian president and the United States stands ready to help. Instead, it has devolved into a political slugfest in the Senate as Republicans seek to block changes at the Internal Revenue Service through the bill designed to keep Kyiv afloat.

The House of Representatives on last Thursday approved a simple bill designed to clear the way for $1 billion loan guarantees for the new government in Ukraine — which has said recently that it will require at least $15 billion to stay fiscally sound in the near term. Along with a non-binding resolution calling for further sanctions passed just days later, the loan guarantees bill then went to the Senate for its approval, and that’s where the trouble began.

While the United States would be putting up some loans, the bulk of the money Ukraine needs is more likely to come from the International Monetary Fund (IMF), whose role since 1945 has been keeping economies from collapsing through the timely infusion of cash loans. In recent years, the developing world began a push to reform the IMF system to better reflect the rise of developing economies like China and increase the amount countries need to pay into the Fund to keep it able to make loans. The IMF’s Board of Governors approved a package of reforms in 2010, but the body’s rules require the formal approval of 85 percent of the voting powers at the international institution. As the U.S. controls 16.7 percent of the votes, due to its role as the largest donor to the Fund, its approval is needed for the package to go through — and that requires Congress to act.

Chairman of the Senate Foreign Relations Committee Sen. Robert Menendez (D-NJ), who introduced the Senate version of the loans bill, added a section approving the IMF reforms as part of the deal, saying in a release that doing so “would allow the United States to leverage significant support from the IMF for Ukraine today and for similar unforeseen crises in the future.” Senate Republicans seem to disagree with Menendez, however, including several who attempted to strip the provision from the legislation in committee. That attempt failed and the bill came out of committee on a vote of 14 in favor and three opposed.

That doesn’t mean the bill has a guaranteed passage in the full Senate, however. Several Republicans, including Sen. Jeff Sessions (R-AL), have insisted that in reforming the IMF, the U.S. will actually be granting Russia a favor, since the reconfigured voting balance at the body would see an increase in Russia’s voting weight. Sen. Rand Paul (R-KY) has gone even further, saying that in providing loan guarantees to Ukraine — which would then be used to pay off Russian creditors — the U.S. is really just giving money to Russia.

Complicating matters further is the introduction of the IRS into the mix. At stake is a series of proposed changes at the government agency affecting 501(c)4 tax-exempt organizations, which would make it more difficult for social welfare groups to switch over to political advocacy activities. Conservatives believe that the changes constitute targeting groups that disagree with the Obama administration, even though liberal groups will also be effected, leading to Republicans seeking to add language delaying the reforms to the Senate’s Ukraine bill.

The dispute was enough to prevent a vote from being called on the legislation on Thursday afternoon. Now with the Senate out of session next week, and several senators already on their way to visit Ukraine in support of the interim government, the timing on the passage of the bill next week seems murkier than ever. Senate Majority Leader Sen. Harry Reid (D-NV) drew headlines on Thursday afternoon in his condemnation of the Republican’s tactic. “It’s hard for me to comprehend how with a clear conscience they could say, ‘Ukrainians, we probably can’t help you because we’re trying to protect the Koch brothers,’” he said, referring to the brothers’ political funding activities, which frequently runs through (c)4 organizations. “And not only that, they’re saying to the American people that protecting the Koch brothers is more important than helping our country.”

But the condemnation of the delay was bipartisan: Sen. John McCain (R-AZ) joined in to slam his Republican compatriots for blocking action on the bill. “I will say to my friends who were objecting to this – and there are a number of them on my side – you can call yourself Republicans; that’s fine because that’s your voter registration,” McCain said in a speech on the Senate floor. “Don’t call yourself Reagan Republicans. Ronald Reagan would never – would never – let this kind of aggression go unresponded to by the American people.” McCain also said, “I’ve been embarrassed before on the floor of the Senate. But I haven’t been embarrassed this way about members of my own party.”

Even if the bill does manage to pass through the Senate with the IMF provisions and without the IRS amendments, it’ll be difficult to gain passage in the House, given Republicans’ usual anathema to both international organizations and what can be seen as cuts to military spending — the bill pulls from underperforming Pentagon accounts to pay for the boost in funding to the IMF. “Senator [Bob] Menendez’ bill to fund reforms at the IMF on the backs of our troops is just looney and I will strongly oppose it if it comes to the House,” said Rep. Buck McKeon (R-CA), chairman of the House Armed Services Committee, told Foreign Policy.

“Senate Democrats want to further raid the very accounts that make our military ready to meet a crisis,” McKeon continued. Sen. Bob Corker (R-TN), the foreign relations committee’s ranking member, has backed the IMF loans but said on Tuesday that House Speaker John Boehner is “not going to bring it up on the House floor unless the (c)(4) issue is dealt with. But then maybe those tied together is what pulls through the IMF piece.”