In Ukraine Crisis, Europe Pledges Carrots While U.S. Contemplates Sticks

In Ukraine Crisis, Europe Pledges Carrots While U.S. Contemplates Sticks

Two Western approaches to curbing Russian influence were on display Wednesday as the European Union and United States unveiled dueling economic assistance packages to Ukraine’s struggling and cash-strapped government.

Leaning on carrots rather than sticks, the E.U. offered a substantial economic package worth as much as $15 billion over the next two years — a sum that dwarfs the $1 billion in American loan guarantees to Ukraine that Secretary of State John Kerry pledged on Tuesday. The U.S. package would require Congressional approval, and people familiar with the matter say powerful lawmakers in both houses are working on legislation that would authorize Obama to spend the money and levy targeted economics sanctions against Russian officials. That’s a provocative step Europe has so far refused to make because of its significant financial business relationship with Russia.

The E.U.’s aggressive aid package is designed to rebuild and secure a "prosperous future for Ukraine," European Commission President Jose Manuel Barroso said Wednesday. It will include up to 8 billion euros of new credit from E.U. financial institutions, 1.6 billion euros in loans, and 1.4 billion euros in grants, according to a fact sheet distributed to member countries. The package will also accelerate a plan for visa-free travel for Ukrainians to the EU — something Moscow has requested for years for its own citizens. In a tweak at Moscow, the overall package of $15 billion also matches the amount Russian President Vladimir Putin offered Ukraine before the ouster of its former president, Viktor Yanukovych.

The loans come at a crucial time, with Ukraine’s pro-Western government estimating that it needs $35 billion over the next two years to cover its operating costs and other expenses. But in Washington, the effort to rehabilitate the Ukrainian government is taking a back seat to efforts to punish Russia for its incursions into the Crimean Peninsula.

On Wednesday, the House Foreign Affairs Committee introduced a resolution in support of sanctions on Russian high-ranking officials, state-owned banks and commercial enterprises. "It is important that Congress support tough sanctions on Russia to pressure it to end its military aggression," said Rep. Ed Royce of California, the Republican chairman of the committee.

Although the resolution is non-binding, aides in the House and Senate say it’s only the first step. Secretary Kerry’s proposed $1 billion aid package will include targeted sanctions against Russian officials, they say. The most hawkish language under consideration is in the Senate Foreign Relations Committee, where lawmakers are drafting a bill that would authorize new sanctions and require that the administration implement them. It’s unclear if the House version will include similar language.

The State Department has not commented on the prospect of Congress effectively forcing the president’s hand, but its spokeswoman, Jen Psaki, suggested this week that sanctions were more likely than not. "It is likely that we will put those in place, and we are preparing that right now," she said. "We’re proceeding down this path." Additionally, Obama administration officials told The Washington Post on Wednesday they were prepared to impose sanctions on Russia unilaterally. 

Unfortunately for the administration, the threat of sanctions carries significantly less weight without Europe. The U.S. has less than $40 billion in annual trade in goods with Russia while European trade with Russia is estimated to be roughly $460 billion per year.

The prospect of European support for the measures, meanwhile is looking less and less likely. The U.S. is largely isolated in its push for new sanctions against Russia because key allies like Germany and Britain oppose imposing the measures and instead prefer to look for a diplomatic solution to the crisis. German Chancellor Angela Merkel has said now is the time for direct talks with Moscow and the deployment of international monitors from the Organization for Security and Cooperation in Europe (OSCE). Britain hasn’t ruled out sanctions permanently, but a British Embassy spokesperson told The Cable that London is not yet ready to join U.S. calls. "We want to see de-escalation rather than continuation down the path that the Russian Government has taken, violating the sovereignty and territorial integrity of another country," said the official. "But we will act in a united way with other nations in the world." On Wednesday, Britain joined fellow E.U. member countries in freezing assets of 18 Ukrainians accused of misuing state funds.

In any event, if the U.S. does move forward with sanctions, Moscow says it will respond without hesitation. "We have frequently explained to the Americans … why unilateral sanctions do not fit the standards of civilized relations between states," Foreign Ministry spokesman Alexander Lukashevich said Tuesday in a statement. " We will have to respond."