03/25/2014 03:25 pm ET Updated Mar 25, 2014

Harry Reid Drops IMF Language From Senate Ukraine Aid Bill


WASHINGTON -- Senate Democrats threw in the towel Tuesday on a bid to secure reforms at the International Monetary Fund as part of a Ukraine aid bill, marking a major blow to President Barack Obama as he meets with allies in Europe.

Senate Majority Leader Harry Reid (D-Nev) announced that the only way to provide Ukraine with economic assistance quickly was to remove the IMF provision from a Senate aid package due to widespread Republican opposition.

"It appears we have a way to move forward on Ukraine," Reid told reporters on Capitol Hill. "I feel very strongly about IMF reform. We need to get that done … as quickly as we can. But the main thing is to get the aid now."

Reid added that he spoke with the White House, which requested the IMF language, about the decision. "Of course they're disappointed," he said.

The Senate bill would have increased the U.S. contribution to the IMF, adding roughly $63 billion to the U.S. quota for the fund. It cleared a procedural vote Monday in its current form by a vote of 78-17. But Senate Minority Leader Mitch McConnell (R-Ky.) said Tuesday that his members would not support the aid bill unless the IMF language was dropped, and House Speaker John Boehner (R-Ohio) indicated the bill wouldn't pass muster in the lower chamber.

Boehner reiterated Tuesday that the IMF reforms were "unrelated" to Ukraine. The Obama administration has argued the opposite, pointing out that ratifying the IMF reforms is critical to increasing Ukraine's borrowing capabilities in a time of crisis. Secretary of State John Kerry told a Senate panel earlier this month that stalling on the IMF reforms -- to which the G20 agreed in 2010 -- was threatening the leadership role of the United States in the organization.

"We must have IMF reform, we must have the quota," Kerry said. "It would be a terrible message to Ukraine for everybody to be standing up talking, appropriately, about what’s at stake and not to be able to follow through."

But some House Democrats acknowledged that the White House was complicating the process of providing expeditious aid to Ukraine by renewing the debate over a contentious subject like the IMF. McConnell quoted some of those lawmakers Tuesday and said it was a "step in the right direction" for Reid to back away from the issue.

Coincidentally, IMF Director Christine Lagarde was in the Capitol for a Women's History Month reception right around the time that Reid was conceding that the IMF provision had to come out of the Senate bill. HuffPost asked her for a response.

"Ooooh, no no no, I'm not giving an interview," Lagarde said as she quickly walked away, adding, "I'm trying as hard as I can."

The Treasury Department called the removal of IMF language from the Ukraine bill a "setback."

"We are deeply disappointed by the news that Republican opposition has forced the Senate to remove the International Monetary Fund (IMF) quota and governance reforms from the Ukraine assistance package," Treasury spokeswoman Holly Shulman said. "Presidents of both parties and leading U.S. businesses have recognized that the IMF is critically important to U.S. economic and national security interests ... In emerging economies such as Ukraine, the Fund can help provide the financing and policy framework for support that Ukraine needs from the international community."

Reid indicated he would try to move on IMF reform separately, although Republicans have demanded something in return: delaying a Treasury Department rule that cracks down on the political activities of nonprofits, known as 501(c)(4)s.

The White House blamed Republicans for killing IMF reform by trying to use the funding as a bargaining chip.

"It’s simply irresponsible that the Republican leadership insisted on holding IMF reforms hostage in an effort to protect their special interest campaign contributors' ability to pour money into the system unchecked," White House spokesman Dan Pfeiffer said in a statement to HuffPost. "Supporting these reforms would have meant Ukraine could access additional assistance and it’s unfortunate that Republicans stood in the way. We will continue to urge Republicans in Congress to do the right thing when it comes to the situation in Ukraine."

This story has been updated with quotes from Christine Lagarde, the Treasury Department and Dan Pfeiffer. Jennifer Bendery contributed reporting.