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If Ukraine Defaults, They Can Blame House Republicans

Getty Images/Win McNamee

Ukraine needs loans to avoid a default and they need them fast. Last week, Secretary of State John Kerry pledged $1 billion to support Ukraine, but that money is now caught up in a political fight in Congress. Democrats want to include long-overdue reforms to the International Monetary Fund that would allow Ukraine to borrow more from the fund, but Republicans are opposed – unless, of course, Democrats will agree to a one-year delay of an IRS rule. “Let's make sure we all understand something: The IMF money has nothing to do with Ukraine," House Speaker John Boehner said on Thursday. But they do: They'd allow Ukraine to borrow 60 percent—around $600 million—more from the IMF.

In 2010, the G20 countries agreed to changes to the IMF that would transfer $63 billion from an emergency fund to the main fund and give emerging countries a larger representation on the board. For the U.S., the implications are minor. It does not increase our contributions to the fund and slightly reduces our voting power, but we retain veto power over major policy decisions. More than 130 countries have already approved of these reforms, but they cannot go into effect until Congress passes them.

These minor reforms should have passed easily, but the administration did not make them a priority before President Barack Obama’s reelection campaign. Now, Republicans are holding them hostage in return for a delay to an IRS rule governing political activity of nonprofit groups. Senate Majority Leader Harry Reid attempted to include them in the omnibus spending bill in January, but Republicans refused. Now, with Russian soldiers amassing on the border and Ukraine saying it has $500,000 left in its treasury, Republicans are doing it once again.

A week ago, the House passed legislation offering Ukraine a $1 billion loan guarantee without the IMF reforms. On Wednesday, the Senate Foreign Relations committee passed a similar bill, but it included the reforms. House Republicans are not happy with this. They wanted the Senate to pass their version of the bill and send it to the president’s desk before both houses recess on Friday. 

Many Republicans, including Boehner, don't think the reforms matter right now. They're wrong. The reforms have a lot to do with Ukraine. What really has nothing to do with Ukraine is the IRS changes that Republicans are demanding. They see something the administration wants and immediately want something in return. That’s often how it works in politics, particularly in divided government. In January, the horse-trading was fair game. But the IMF reforms are now vital for Ukraine’s national security—a default would trigger an economic crisis that could destabilize the entire country. Nevertheless, the Republican position hasn’t changed. They want a scalp in return and will hold Ukraine hostage to get it.