IMF approves US$17.5b lifeline for Ukraine

The IMF headquarters in Washington, DC. (AFP/Saul Loeb)

WASHINGTON: The IMF handed Ukraine a US$17.5 billion lifeline on Wednesday (Mar 11) as the United States agreed to send military aid to bolster its forces against pro-Russian rebels - but stopped short of promising weapons.

The United States also expanded the reach of its economic sanctions targeting Russian banks and officials, a move Moscow branded a "political provocation" that would only worsen the crisis in breakaway eastern Ukraine.

Ukrainian President Petro Poroshenko welcomed the increased US support in the face of what he called the separatists' "barbaric aggression," despite Washington snubbing growing calls for arms and ammunition.

After a call with US Vice President Joe Biden and a meeting in Kiev with sympathetic US congressmen, Poroshenko thanked the United States for the offer to send military equipment - but not weapons - worth US$75 million.

Ukraine has asked Western powers for weapons to help it fight the rebellion - an idea opposed by Germany, which fears this would escalate the conflict - but Washington remains cautious.

US officials said the package would include 230 Humvee vehicles, unarmed Raven drones, counter-mortar radars, night vision devices and various medical and communications gear.

Meanwhile, new US sanctions targeted officials in the separatist self-proclaimed Donetsk People's Republic in Ukraine, as well as a Russian bank and a nationalist group.

The Russian National Commercial Bank has become the largest bank in Crimea since Russia seized the region from Ukraine last year. Also listed was the Eurasian Youth Union, a nationalist Russian group said to recruit fighters to join the rebels.

Three officials of the pro-Moscow government of former Ukraine president Viktor Yanukovych, who was overthrown in an uprising in February 2014, were also added to US sanctions lists.

The sanctions freeze any assets the individuals and institutions hold on US territory and ban Americans from doing business with them.

Russia's deputy foreign minister Sergei Ryabkov said that Washington's allegations that Moscow is backing the separatist movement were "dreary and pointless," as he slammed the new sanctions.

"It's difficult to understand what is guiding the US Treasury Department and other authorities in introducing sanctions and expanding the sanctions lists," he told the Interfax news agency.

"We see no logical link that would in some way explain such decisions, given Washington's declaration that it is interested in the situation returning to normal."

SHATTERED FINANCES

The Washington-based IMF, meanwhile, gave Kiev breathing room to rebuild its shattered finances, reeling from the fighting in its industrial heartland.

The four-year, US$17.5 billion aid plan replaces an existing IMF programme, less than a year old, that proved inadequate to stabilise Ukraine's finances.

Five billion dollars will be disbursed immediately and the programme will support "deep and wide-ranging policy reforms," IMF managing director Christine Lagarde said.

First outlined by Lagarde in early February, after the IMF reached a preliminary agreement with Ukrainian authorities on economic reforms, the IMF aid is to be part of about US$40 billion in assistance from the international community.

The IMF statement said the new loan is "based on a comprehensive economic reform programme supported by the Fund as well as by additional resources from the international community." Separately, Sweden confirmed its contribution of a US$100 million loan to the package.

LOSING PATIENCE

Despite a Feb 12 agreement in Minsk to halt hostilities, fighting has continued around Debaltseve, Donetsk and the port of Mariupol, killing at least 65 Ukrainian troops. There has also been an escalation of tensions between Russia and the West.

Moscow has withdrawn from the landmark Treaty on Conventional Forces in Europe and the United States has begun to deploy 3,000 troops on a three-month exercise to the Baltic region.

"If Russia continues to support destabilising activity in Ukraine and violate the Minsk agreements and implementation plan, the already substantial costs it faces will continue to rise," the US Treasury warned.

In the latest sign that Germany too is losing patience, Chancellor Angela Merkel said Wednesday she had refused to attend a May 9 World War II commemoration parade in Moscow.

President Vladimir Putin's Russia, meanwhile, denies detailed allegations from Kiev and Western capitals that it has sent heavy weapons and thousands of troops to support the rebels.

The separatist conflict has killed more than 6,000 people in 11 months - Ukrainian troops, separatist militiamen, Russian "volunteers" and civilians caught in the crossfire.