Areg Galstyan
In general, the new bill should not be seen as something out of the ordinary. Republicans, even when they were the minority in the Senate, used to lobby tough resolutions against Russia. Today the Republicans set the agenda in both Houses, and this fact is to be taken into consideration by Obama. 
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15 january 2015 | 01:06

Ukraine Freedom Support Act of 2014

On December 12 the Senate unanimously approved the bill entitled ‘Ukraine Freedom Support Act of 2014’. This bill was introduced in the Committee on Foreign Affairs under the sponsorship of Republican senators Bob Corker and Mark Kirk and Democrat Robert Menendez back in July 2014, and also received support among both Republicans and Democrats. Moreover, the act was also supported by other influential sponsors – Democratic Senators Edward Markey and Benjamin Cardin. This fact suggests that in Congress there are no significant differences over financial, military and technical assistance to Ukraine and introduction of a new package of sanctions against Russia.

But before analyzing the main points of the bill we should note that apart from the local problems concerning Ukraine and Russia, the senators focused on the military and technical capabilities of the United States and NATO in Central and Eastern Europe to ensure safety of its allies in the region. For instance, during the very first hearing on the bill Senator Corker said:

"It is much easier to deter threats and protect NATO allies from Russia than to regain their liberation from the power of the aggressor. Now that the US needs to reaffirm its commitment to the transatlantic security, the bill on the prevention of the Russian aggression will help to improve the security of NATO".

The US lawmakers embraced a wide range of political, military and economic issues. Firstly, according to the text of the bill, it is expected to increase the US financial support to Ukraine, both unilaterally and through lobbying the interests of Kiev in the International Monetary Fund. As far as this issue is concerned, there are no significant disagreements between Congress and the White House, but there is a question of legal and technical implementation. Therefore, in order to give Ukraine a special status of the largest recipient of US aid it is necessary to review the Foreign Assistance Act of 1961 and the Freedom Support Act of 1992. And it will take more than two months for this procedure to pass only the Judiciary Committee, which will be followed by discussions in respective committees of both chambers. Lastly, it demands verification of the Constitutional Court and approval of the Administration. In other words, Ukraine should not expect foreign financial assistance to be implemented on a large scale in the near future.

Secondly, the bill touches upon energy issues, which were mainly developed by Senators Mark Kirk and Carl Levin, and proposes steps to diversify energy sources to reduce dependence of Ukraine and other European countries on Russian gas.

The technical realization of the bill is also a big question. America has only three ways to diversify its energy sources. The first one is direct export of the US natural gas to Europe. This option is not feasible due to the objective reasons. Firstly, there is no infrastructure required for that. Secondly, it is necessary to obtain an export permit from the US Department of Energy. This would be very difficult taking into account the financial resources and the level of influence of the energy lobby, which is not interested in implementing any projects outside of America.

The second option refers to the US allies in the Middle East and the South Caucasus. Americans are interested in projects that involve Qatar and Iran, Azerbaijan and Turkey – and bypass Russia. This option is more realistic than the direct export. But Washington will have to make great efforts to win over Tehran, which has its own pragmatic interests to ensure. Moreover, the US relations with Turkey and Azerbaijan are currently complicated with both governments facing harsh criticism from the part of Washington recently on a number of political issues (ISIL, human rights, etc.). The relations with Qatar, which allegedly supports the Islamic state and transfers American weapons to terrorists, are also hardly rosy.

And finally, the third variant implies a construction of a joint pipeline of Canada and the United States (Keystone XL) to the Gulf of Mexico. This pipeline in could become the first Trans-Atlantic pipe to Europe, and the plan to construct it is supported by the Republican majority in Congress. However, in this case the efforts of Congress and lobbyists are not enough since the decision on the Keystone XL is to be made by the Administration and the State Department. Meanwhile, the White House believes, that the pipeline may cause serious environmental problems. Importantly, President Barack Obama has reached an important agreement with China to reduce greenhouse gas emissions. This was a significant achievement, and Obama is unlikely to approve the construction of the pipeline, thus discrediting not only himself and the Administration, but also the Democratic Party. 

Apart from that, the bill pays much attention to Russia from the military point of view. Specifically, during the hearings Senator Roy Blunt said that Russia's defense spendings had increased by 31% since 2008, while the European military budget decreased by 15% over the same period of time.

The Republicans defined it as a unilateral disarmament of Europe that had a negative impact on NATO's ability to defend itself. In this sphere, the bill gives the president the authority to “provide certain states with direct military assistance (including anti-tank and anti-aircraft weapons and small arms) according  to the needs of the Armed Forces”. The list includes Georgia, Ukraine and Moldova. According to the bill, during the upcoming year the US should deliver weapons to Ukraine at the overall cost of 350 million USD.

Given that the leader of the Armed Services Committee Senator John McCain and Majority Leader Mitch McConnell are consistent supporters of Ukraine, more decisions on military-technical issues of this kind on the Senate level should be highly expected. The only deterrent in this process is the president Barack Obama. The fact is that the president asked Congress not to rush with the adoption of this bill and allow the Administration to consider future steps. The Senate disregarded the request, and Obama can now veto the bill. Obama has stated repeatedly that all decisions should be made in cooperation between the Congress and the West Wing. It was during his first term of presidency that Obama made it clear that he would not tolerate Congress challenging this cooperation.

Republicans understand this very well, but still act decisively on every issue. For instance, the Lower Chamber adopted the resolution on Ukraine under the sponsorship of Congressman Adam Kissinger. Having taken the majority in the Senate after the Midterm elections and retaining control in the House, the Republicans believe that Obama will become more tractable. Undoubtedly, there is a threat of terrorism in the Middle East that Obama has to take into consideration for without support from the Republican majority any strategy is likely to fail. 

Another significant part of the document is devoted to the introduction of a new package of sanctions against Russia. The bill on behalf of the US Senate authorizes the US president to impose sanctions against Russian companies such as Gazprom and Rosoboronexport. In particular, in the third section the first paragraph states that the President must start the practical implementation of the first steps against Rosoboronexport within 45 days. Additionally, both systemic and individual sanctions against high-ranking officials of Gazprom are expected to be introduced.

Obama agrees with the Republicans on the issue of the new package of sanctions against Russia. In the White House it has recently been noted that the IMF forecasts for economic growth of Russia were degraded twice in 2014, and it is currently close to zero. Daniel Glaser, Assistant Secretary for Terrorism and Financial Intelligence in the Department of the Treasury, believes that sanctions are effective. Moreover, the influential agency Moody's and Fitch changed the outlook for Russia's sovereign rating from ‘stable’ to ‘negative’, and the agency Standard & Poor's downgraded the Russian rating in foreign currency from BBB to BBB-. Glaser noted that the decrease of these indicators had had a negative impact on the Russian economy giants such as Gazprom, Rosneft and VTB Bank

Meanwhile, the Russian Central Bank and the IMF forecast annual net outflow of 100 billion USD. Moreover, the increased risks caused increased dependence of Russian companies on international debt capital markets. It has happened to the  Lukoil company, which has already announced its intention to cut costs. 

In general, the new bill should not be seen as something out of the ordinary. Republicans, even when they were the minority in the Senate, used to lobby tough resolutions against Russia.

Today the Republicans set the agenda in both Houses, and this fact is to be taken into consideration by Obama. Thus, the head of the White House has no more opportunities to be soft. As far as foreign affairs are concerned, he has to become even tougher than Republicans in order to retain control over his own Administration and to remain master of the situation until the end of his term. 

 

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