US offers $2bn of financial support to Ukraine

The US pledged to provide as much as $2bn in new financial assistance for Ukraine this year, even as the IMF and the new government in Kiev continued their efforts to shore up an existing bailout programme.

The $2bn in loan guarantees announced by Washington came after a pledge last week by the EU for an extra €1.8bn in help to Kiev. But the combined pledges fall far short of the extra $15bn the International Monetary Fund says is needed to plug a hole in Kiev’s budget that has grown as the economy has collapsed due to the conflict in the country’s east, home to much of its manufacturing base.

The US announced the new help for Ukraine as Nathan Sheets, the US Treasury’s under secretary for international affairs, met in Kiev with Arseniy Yatseniuk, prime minister, and other senior officials to discuss what the IMF and others say are much needed reforms.

But the announcement also contained further signs of how wary the IMF and other donors are of providing extra help to Kiev without greater signs that the neww government can deliver on promised reforms.

The US said it would provide $1bn in new loan guarantees once it was clear that Kiev “remains on-track” with the existing reform programme it has agreed with the IMF. A further $1bn in loan guarantees would only be made available “if Ukraine continues making concrete progress on its reform agenda and if conditions warrant”, the US Treasury said in a statement.

The offer of fresh financial support from the US came as hopes of a diplomatic breakthrough over the eight-month Ukraine conflict were dashed as a summit planned for later this week was postponed.

The mooted meeting of Russian, Ukrainian, French and German leaders will not now take place in Astana, Kazakhstan, after the countries’ foreign ministers failed to make progress at talks in Berlin on Monday on implementing a four-month-old ceasefire.

The ceasefire came under further strain on Tuesday after at least 10 civilians were killed and 13 injured after a shell hit a bus at a checkpoint outside Donetsk, in the worst single incident involving civilians since the ceasefire was signed in Minsk in September.

Earlier Nato’s top general had noted a “fairly important uptick” in fighting in east Ukraine in recent days, after a lull over the Christmas and new year holidays.

At a press conference in Poland, US general Philip Breedlove, Nato’s supreme allied commander for Europe, also alleged that Russia was continuing to provide support and training to pro-Russian separatists in Ukraine’s Donetsk and Lugansk regions.

“What there was not a lull in is the continued resupply, continued training, and continued organisation of forces east of the line of contact,” he said, referring to a demarcation line between Ukrainian forces and the rebels agreed in September.

Gen Breedlove added that Nato was considering beefing up its exercises in the Baltic region in response to the Ukrainian situation and increased Russian activity in the region.

Ukrainian soldiers defending Donetsk airport, where intense fighting has continued despite the ceasefire, said on Tuesday they had been given an ultimatum by rebels to leave by 5pm local time, or they would “be destroyed”.

Much of the airport’s control tower, long a symbol of resistance to rebel control over the city during months of bombardment, earlier collapsed after what Ukrainian authorities said was rebel attacks using artillery and anti-aircraft systems.

In depth

Crisis in Ukraine

Pro-Moscow separatists in eastern Ukraine have escalated the political turmoil that threatens to tear the country apart

Further reading

The failure of Monday night’s talks in Berlin left efforts to resolve the conflict mired in uncertainty. Ukraine had pushed for talks to be hosted in the Kazakh capital, Astana, on January 15.

But the four countries’ foreign ministers disagreed on how to ensure the Minsk agreement was properly implemented.

“The differences in opinion made it clear how difficult it is to make progress towards a political solution or a summit in Astana, from which much is expected and which must be prepared,” Frank-Walter Steinmeier, the German foreign minister, told reporters after the talks, according to Reuters.

Sergei Lavrov, Russia’s foreign minister, called for another meeting of the Contact Group — which includes, Ukraine, Russia, the OSCE and rebel leaders — to determine how to implement the 12-point Minsk agreement.

German chancellor Angela Merkel had earlier made clear she would not attend the Astana meeting without a clear commitment from Russia to fulfil key parts of the Minsk deal. Hopes for talks had risen earlier this month after François Hollande, the French president, spoke to Russian president Vladimir Putin and said some EU sanctions on Russia could be lifted if the ceasefire agreement was put into practice.

Failure of the talks also contributed to further pressure on the rouble, which was down more than 4 per cent in afternoon trading in Moscow following further drops in the price of oil.