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Tags: Ukraine | Russia | Kerry

Kerry Arrives in Kiev Vowing Ukraine Aid With Russian Penalties

Kerry Arrives in Kiev Vowing Ukraine Aid With Russian Penalties
Secretary of State John Kerry lays roses atop the Shrine of the Fallen in Kiev on March 4.

Tuesday, 04 March 2014 10:48 AM EST

U.S. Secretary of State John Kerry arrived today in Kiev promising to guarantee $1 billion in loans to Ukraine’s embattled leaders while threatening to punish Russia with sanctions for its military action in Crimea.

Kerry’s stop in the Ukrainian capital raises the stakes by putting him on the diplomatic front lines of what remains a tense standoff, even as Russian President Vladimir Putin said he saw no immediate need to invade eastern Ukraine.

U.S. sanctions such as travel and asset bans on Russian individuals and institutions are likely within days if Russia doesn’t de-escalate its actions in Ukraine and return its forces to barracks, according to U.S. officials traveling with Kerry who spoke on condition they not be named because the penalties aren’t final.

At the same time, the Obama administration is working with Congress to provide $1 billion in loan guarantees that would help cushion the effects of reduced energy subsidies on Ukrainian citizens, according to a White House statement.

It’s also “moving quickly” to deploy more financial and technical assistance to help Ukraine withstand “politically motivated trade actions by Russia,” Treasury Secretary Jacob J. Lew said in a statement released in Washington.

Kerry’s trip to Kiev is meant to underscore U.S. support for a Ukrainian government that came to power in a popular uprising, and to provide concrete assistance to help the fledgling administration prevail in the face of intimidation from its giant neighbor to the east.

Test of Sanctions

Ukraine also is becoming a test of whether Western economic and diplomatic weapons -- including sanctions -- can have much impact on Putin, who has sent military forces into Crimea and threatened to intervene elsewhere in Ukraine in the name of protecting ethnic Russians.

In his first public remarks since Russian forces took control of the Crimean peninsula in southern Ukraine, Putin reserved the right to use force to protect ethnic Russians. There’s “no such necessity” at present, he told reporters at his residence near Moscow today.

Matthew Rojansky, director of the Kennan Institute at the Wilson Center, a Washington policy group, said non-military pressure on Putin could be effective.

“The last decade has been a story of Russia’s economic growth as it becomes a fully integrated part of the international economy,” he said in a telephone interview. “The flip side is that Russia can’t act without seeing the effects on the Russian economy.”

‘Massive Devaluation’

Rojansky pointed to the “massive devaluation of the ruble, the massive slide on the stock market” and said “it can get much worse” if the U.S. and EU decide to freeze the assets of Russian companies.

Russia raised its main interest rate the most since 1998 as its currency plunged to a record low and investors pulled money from the stock market on tensions over Ukraine.

Today, Russia’s Micex Index rallied on Putin’s signals of a de-escalation of the crisis, and the ruble climbed from a record low.

The ruble appreciated 1.1 percent to 42.1859 against the central bank’s basket by 6:41 p.m. in Moscow, paring yesterday’s 1.5 percent slump. The Micex Index, Russia’s benchmark stock gauge, jumped 5.3 percent after falling 11 percent yesterday in the biggest decline since November 2008. OAO Gazprom, which sends half its natural gas exports to Europe through Ukraine, surged 6.9 percent.

U.S. Advice

The U.S. will advise the National Bank of Ukraine and the Finance Ministry on market pressures and on how to overhaul its energy industry, according to the American officials. They also are preparing to provide technical advice on Ukraine’s rights in the World Trade Organization in the face of expected pressure from Russia, according to a U.S. government fact sheet.

The U.S. and allies already have halted preparations for the Group of Eight summit planned for June in Sochi, Russia. The U.S., the U.K., Canada, France, Germany, Italy and Japan condemned in a statement Russia’s “clear violation of the sovereignty and territorial integrity of Ukraine.”

Kerry said in a March 2 appearance on CBS’s “Face the Nation” that Russia risked being expelled from the G-8.

The Pentagon suspended military ties with Russia because of the crisis, a move that affects military exercises, bilateral meetings, port visits and planning conferences, Navy Rear Admiral John Kirby said yesterday in a statement. The U.S. also halted bilateral trade and investment talks with Russia, Trevor Kincaid, a spokesman for the U.S. Trade Representative’s Office, said yesterday in an e-mail.

Not Potent

Charles Kupchan, a professor at Georgetown University in Washington, said nothing the West can do including isolating Russia diplomatically — by suspending the G-8 summit and a NATO-Russia Council — and boosting North Atlantic Treaty Organization engagement on the alliance’s eastern frontier is likely to reverse Putin’s course.

“None of those are sufficiently potent to get Putin out,” Kupchan said on a conference call with reporters yesterday. “Unfortunately he has really moved in, in a big way in the last 48 hours.”

President Barack Obama, speaking to reporters yesterday before a White House meeting with Israeli Prime Minister Benjamin Netanyahu, said the U.S. and allies are preparing sanctions to show Russia its actions will be “costly.”

Obama’s Comments

“We are examining a whole series of steps — economic, diplomatic — that will isolate Russia” if it continues on its current course, said Obama, who spoke to Putin by telephone on March 1. One option he cited would be to send international monitors to “de-escalate the situation.”

Obama met for more than two hours last night with his National Security Council to discuss steps the U.S. can take to pressure Russia into defusing the crisis, according to a senior administration official who described the closed-door session on condition of anonymity.

The Senate Foreign Relations Committee is “consulting with the administration on possible sanctions actions against individual Russians and Ukrainians that range from visa bans and asset freezes, to the suspension of military cooperation and sales, as well as economic sanctions,” the panel’s chairman, Democratic Senator Robert Menendez of New Jersey, said in an e- mailed statement.

European Union President Herman Van Rompuy yesterday called a March 6 emergency EU summit, where leaders may debate measures to punish Russia if it doesn’t ease the crisis.

EU Condemnation

European foreign ministers “strongly condemned” Russia’s moves in Crimea. “In the absence of de-escalating steps by Russia, the EU shall decide about consequences for bilateral relations between the EU and Russia,” including suspending talks to deepen trade ties and ease European travel for Russian citizens as well as “further targeted measures,” the ministers said in a statement yesterday.

Thomas Pickering, a former U.S. undersecretary of state and ambassador to Russia from 1993 to 1996, said his biggest concern was over-reaction on both sides.’’ Putin’s “success in Crimea so far might move him to think that in the next week he can move forces into eastern Ukraine.”

The best option for the U.S. would be to “see what you can do to slow down, if not stop, Russian expansionist efforts” and work with the European Union and the International Monetary Fund to help restore stability in Ukraine, Pickering said in a phone interview.

Putin’s Reputation

A range of diplomatic and economic measures would have a damaging impact on Russia, even considering that it holds about $500 billion in foreign reserves, Rojansky said in a phone interview.

Even so, Rojansky said he doubts that Putin will back down because Ukraine is essential to his vision of a Eurasian Union as a counter to the European Union and because his personal authority is intertwined with that project.

“His reputation of a man who sets out a goal and delivers is the underpinning of his authority in Russia,” he said.

The U.S. has to be careful not to overstate its commitments in Ukraine because “we do not have a lot of levers we can pull” to influence Russia, said Sean Kay, a professor of international relations at Ohio Wesleyan University who specializes in Europe.

“We have at best peripheral interests in Ukraine,” Kay said in a phone interview. “The Russians have vital interests in Ukraine. There are dangers of creating false promises of what we might be able to do in Ukraine.”

© Copyright 2023 Bloomberg News. All rights reserved.

U.S. Secretary of State John Kerry arrived today in Kiev promising to guarantee $1 billion in loans to Ukraine’s embattled leaders while threatening to punish Russia with sanctions for its military action in Crimea.
Tuesday, 04 March 2014 10:48 AM
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