Snag in US Congress delays Ukraine loans, some Republicans balk at IMF reforms

WASHINGTON – President Barack Obama’s promised $1 billion loan guarantee to the new Ukraine government will not be approved by Congress for weeks, with funds hung up in a disagreement among some Republicans over a part of the bill that would expand International Monetary Fund lending capacity.

The bill also contains sanctions on Russia for its occupation of Crimea, the Black Sea peninsula where a new pro-Russian regional parliament has ordered a referendum Sunday on leaving Ukraine and joining with Russia. It won’t be approved until after Congress returns from recess on March 24.

The Senate Foreign Relations Committee, with four Republicans voting in favour of the measure and three opposed, sent the bill to the floor of the upper chamber on Wednesday. But given the dispute over IMF reforms the vote was not possible before the Thursday evening recess.

House of Representatives Speaker John Boehner urged the Senate again on Thursday to adopt House-approved legislation for the loans, without sanctions or IMF provisions.

Many House Republicans object to expanding the IMF’s lending capacity, which every other major country has approved. They say it increases U.S. taxpayer exposure to bad international debts and that leaving aside the sanctions and IMF issues would immediately release money for Ukraine.

Other Republicans oppose paying for the loans with unused military money.

The legislative snag coincides with Secretary of State John Kerry’s departure for London and meetings with Russian Foreign Minister Sergey Lavrov. Absent congressional action on sanctions, Kerry’s hand might be somewhat weakened despite his warnings Thursday that Russia will face an immediate, “very serious series” of steps from the United States and Europe if it annexes Ukraine’s strategic Crimea region.

Kerry said before a House committee “boy do we need aid for Ukraine and we need it now.”

Kerry told a Senate committee that Moscow should expect the U.S. and European Union to take measures against it on Monday should it accept and act on the expected results of this weekend’s referendum in Crimea. The U.S. and EU say the vote violates Ukraine’s constitution and international law. Russia has said it will respect the results of the referendum.

“There will be a response of some kind to the referendum itself,” Kerry told the lawmakers on Thursday. “In addition, if there is no sign (of Russian compromise) there will be a very serious series of steps on Monday in Europe and here.”

“My hope is they will become aware of the fact that the international community is really strongly united,” he said.

Kerry said he had spoken to Lavrov before the hearing and that hoped “reason would prevail.” But stressed there was no guarantee of that.

Kerry and Lavrov have spoken almost daily as the Ukraine crisis has unfolded but have yet to find any common ground.

He suggested that he would be pressing Lavrov for Russia to accept “something short of a full annexation” of Crimea but did not elaborate on what such a scenario might entail.

Russian moved into Crimea after Ukraine’s pro-Russia President Viktor Yanukovych fled the country after weeks of massive protest against his decision to scrap a deal for greater integration with the European Union in favour of $15 billion in aid from Russia. Many protesters and some security agents were killed in sniper fire shortly before Yanukovych fled.

Russia denies the forces in Crimea are from its military but are instead Crimean self-defence soldiers who are protecting the 60 per cent Russian majority that lives on the peninsula. President Vladimir Putin has also received approval from his legislature to sent forces into eastern Ukraine which also has a large ethnic Russian population.