Western nations underwrite Ukraine’s transition

(By Deutsche Welle) Since Russia’s annexation of Crimea, the EU and US have promised billions in financial aid to shore up the embattled government in Kyiv. DW takes a look at how Brussels and Washington are using the funds.

As Ukraine’s cash-strapped interim government fights a costly battle against an armed pro-Russian uprising in the country’s east, Western nations have agreed to transfer billions in aid to help Kyiv survive its escalating economic and political confrontation with Moscow.

On Wednesday (07.05.2014), Ukraine’s central bank announced that it received $3.19 billion (2.29 billion euros) from the International Monetary Fund (IMF), the first tranche of a $17 billion international bailout. With the IMF deal concluded, Kyiv has successfully fulfilled the precondition for a European Union aid package totaling 11 billion euros.

Meanwhile, the US Congress has approved some $1 billion in loan guarantees for Ukraine. Additionally, Washington has signed off on tens of millions of dollars of broadly defined “security assistance” for countries in Central and Eastern Europe, including Ukraine. So far, the White House has said that it opposes delivering weapons to Kyiv.

“The United States has given some money but ultimately Ukraine is in the EU’s backyard; Ukrainians have protested under an EU flag; it’s up to the EU to support Ukraine in this process of transformation,” Amanda Paul, with the European Policy Centre, told DW.

“But of course it’s quite a leap of faith given Ukraine’s track record in carrying out reform[…],” Paul said.

EU aid package conditional

The IMF and EU aid packages are contingent on Kyiv implementing a series of reforms to fight corruption and increase transparency. Under Ukraine’s association agreement with Brussels, Kyiv has to ensure judicial independence and the rule of law, according to Peter Stano, spokesman for EU Enlargement Commissioner Stefan Füle.

“This unprecedented amount of aid and the structure of this assistance are related to Ukraine signing and implementing the association agreement,” Stano told DW. “That means there are strong commitments to implement reforms.”

The EU has designated a total of 1.6 billion euros for what it refers to as macro-financial assistance. That money will help Ukraine narrow its budget deficit and potentially pay off some of its outstanding gas debts to Russia, according to Simon O’Connor, the European Commission’s spokesperson for economic and monetary affairs.

Brussels has sent a team to Kyiv to evaluate the interim government’s budgetary needs, O’Connor said. But ultimately, Ukraine’s leadership will decide how to allocate those EU funds within its budget, he added.

In addition, the EU has earmarked 1.4 billion euros of development assistance for Ukraine over the course of seven years. This money would be aimed at strengthening democratic institutions and respect for human rights in the country.

Brussels has also proposed investing around 8 billion euros in Ukraine’s infrastructure, with 3 billion coming from the European Investment Bank (EIB) and 5 billion from the European Bank for Reconstruction and Development (ERBD). This aid money, however, is focused on long-term projects and would have little impact on Ukraine’s current financial travails.

In contrast to the micro-financial assistance, the EU will play a larger role in deciding how aid is spent on specific projects aimed at improving Ukraine’s infrastructure and governance, according to Stano.

“We have people on the ground who are controlling every stage of the process,” Stano told DW.

US technical and security assistance

In Early April, the US Congress overwhelmingly voted a bill into law that earmarks hundreds of millions of dollars in assistance for Ukraine. The legislation provides $1 billion in loan guarantees to help stabilize Kyiv’s finances.

But Congress also designated $50 million to help strengthen democratic governance in Ukraine. That includes fostering institutional reforms; supporting the presidential elections on May 25th; assisting in diversifying the country’s energy supplies; expanding access to independent media; and supporting the empowerment of women.

In addition, the legislation appropriated $100 million to enhance security cooperation with countries in Central and Eastern Europe, including Ukraine. The money is earmarked to help build the capacities of the military, intelligence and security services in the region. The funding would also provide “defense articles and defense services” as well as training to Ukraine and neighboring nations.

A ‘defense article’ is defined as any weapon, weapons system, munition, aircraft, vessel, boat or other implement of war. It can also include machinery or other items necessary for manufacturing or repairing any of the aforementioned articles. A defense service includes training, technical assistance, or advice given to a foreign military.

Lethal military aid unlikely

Although the definition of defense articles includes weapons, expert Jennifer Moroney said – that in the context of the congressional legislation – the $100 million will most likely be used for non-lethal aid such as communications equipment. Any training by the US of Ukrainian forces would be for non-lethal equipment, she added.

“If we were going to be providing lethal equipment, you would basically have to rewrite the Ukraine support act to really specify,” Moroney, with the Rand Corporation, told DW. “All of the characterization of the aid is all about non-lethal assistance… to go beyond that would require an amendment to this act and serious discussion about the implications politically.”

So far, the White House has publicly acknowledged sending $8 million of non-lethal military assistance to Kyiv. That includes bomb disposal equipment, hand-held radios, engineering equipment, vehicles, and non-lethal tactical gear for Ukraine’s Border Guard Service.

But 22 Senate Republicans have introduced legislation calling for the White House to transfer $100 million worth of lethal military aid to Kyiv, including anti-tank and anti-aircraft weaponry as well as small arms. Given that the Democrats have a majority in the Senate and President Obama has veto power, the Republican bill is unlikely to become law.

“If that would get passed, that would change the calculus completely and it would really send obviously a strong message to Russia that we’re in this fight,” Moroney said.

Washington also passed legislation that appropriated an additional $10 million to beef up Radio Free Europe (RFE) and Voice of America’s (VOA) broadcasts to eastern Ukraine, Crimea, and Moldova. This so-called “programming surge” aims to increase the number of reporters in eastern Ukraine, particularly Crimea, and support “analytical and investigative journalism” in the region.

According to the legislation, the goal of the programming surge is to “counter […] misinformation that may originate from other news outlets, especially Russian supported news outlets.” The $10 million would support broadcasts in the Russian, Tartar, and Ukrainian languages. Crimea is home to an ethnic Tartar minority, which opposed Moscow’s annexation of the Black Sea Peninsula.

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