The Cable

In Ukraine Crisis, Europe Pledges Carrots While U.S. Contemplates Sticks

Two Western approaches to curbing Russian influence were on display Wednesday as the European Union and United States unveiled dueling economic assistance packages to Ukraine's struggling and cash-strapped government.

Leaning on carrots rather than sticks, the E.U. offered a substantial economic package worth as much as $15 billion over the next two years -- a sum that dwarfs the $1 billion in American loan guarantees to Ukraine that Secretary of State John Kerry pledged on Tuesday. The U.S. package would require Congressional approval, and people familiar with the matter say powerful lawmakers in both houses are working on legislation that would authorize Obama to spend the money and levy targeted economics sanctions against Russian officials. That's a provocative step Europe has so far refused to make because of its significant financial business relationship with Russia.

The E.U.'s aggressive aid package is designed to rebuild and secure a "prosperous future for Ukraine," European Commission President Jose Manuel Barroso said Wednesday. It will include up to 8 billion euros of new credit from E.U. financial institutions, 1.6 billion euros in loans, and 1.4 billion euros in grants, according to a fact sheet distributed to member countries. The package will also accelerate a plan for visa-free travel for Ukrainians to the EU -- something Moscow has requested for years for its own citizens. In a tweak at Moscow, the overall package of $15 billion also matches the amount Russian President Vladimir Putin offered Ukraine before the ouster of its former president, Viktor Yanukovych.

The loans come at a crucial time, with Ukraine's pro-Western government estimating that it needs $35 billion over the next two years to cover its operating costs and other expenses. But in Washington, the effort to rehabilitate the Ukrainian government is taking a back seat to efforts to punish Russia for its incursions into the Crimean Peninsula.

On Wednesday, the House Foreign Affairs Committee introduced a resolution in support of sanctions on Russian high-ranking officials, state-owned banks and commercial enterprises. "It is important that Congress support tough sanctions on Russia to pressure it to end its military aggression," said Rep. Ed Royce of California, the Republican chairman of the committee.

Although the resolution is non-binding, aides in the House and Senate say it's only the first step. Secretary Kerry's proposed $1 billion aid package will include targeted sanctions against Russian officials, they say. The most hawkish language under consideration is in the Senate Foreign Relations Committee, where lawmakers are drafting a bill that would authorize new sanctions and require that the administration implement them. It's unclear if the House version will include similar language.

The State Department has not commented on the prospect of Congress effectively forcing the president's hand, but its spokeswoman, Jen Psaki, suggested this week that sanctions were more likely than not. "It is likely that we will put those in place, and we are preparing that right now," she said. "We're proceeding down this path." Additionally, Obama administration officials told The Washington Post on Wednesday they were prepared to impose sanctions on Russia unilaterally. 

Unfortunately for the administration, the threat of sanctions carries significantly less weight without Europe. The U.S. has less than $40 billion in annual trade in goods with Russia while European trade with Russia is estimated to be roughly $460 billion per year.

The prospect of European support for the measures, meanwhile is looking less and less likely. The U.S. is largely isolated in its push for new sanctions against Russia because key allies like Germany and Britain oppose imposing the measures and instead prefer to look for a diplomatic solution to the crisis. German Chancellor Angela Merkel has said now is the time for direct talks with Moscow and the deployment of international monitors from the Organization for Security and Cooperation in Europe (OSCE). Britain hasn't ruled out sanctions permanently, but a British Embassy spokesperson told The Cable that London is not yet ready to join U.S. calls. "We want to see de-escalation rather than continuation down the path that the Russian Government has taken, violating the sovereignty and territorial integrity of another country," said the official. "But we will act in a united way with other nations in the world." On Wednesday, Britain joined fellow E.U. member countries in freezing assets of 18 Ukrainians accused of misuing state funds.

In any event, if the U.S. does move forward with sanctions, Moscow says it will respond without hesitation. "We have frequently explained to the Americans ... why unilateral sanctions do not fit the standards of civilized relations between states," Foreign Ministry spokesman Alexander Lukashevich said Tuesday in a statement. " We will have to respond."

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The Cable

Netanyahu Praises Kerry's Peace Efforts

After facing months of public attacks from Israeli officials for his "misplaced obsession" with peace between Arabs and Israelis, Secretary of State John Kerry received a ringing -- and striking -- public endorsement from Israeli Prime Minister Benjamin Netanyahu on Tuesday. 

During a speech in front of a hawkish pro-Israel audience, Netanyahu applauded Kerry's devotion to peace negotiations and offered support for what those efforts could achieve.

"We could better the lives of hundreds of millions," Netanyahu said. "That's why I want to thank the indomitable John Kerry."

The remarks came at the annual policy conference of the American Israel Public Affairs Committee (AIPAC), a powerful pro-Israel lobbying organization that has been increasingly at odds with the Obama administration's efforts to limit Iran's nuclear program and broker peace in the Middle East. Those tensions burst into the open earlier this year when AIPAC lobbied lawmakers to pass legislation that would impose new punitive measures on Iran if the current talks ended without a deal. The administration threatened to veto the bill, and it eventually stalled in the Senate.

The veto threat was part of a concerted administration effort to persuade Netanyahu to accept a framework plan for final-status peace negotiations with the Palestinians that Kerry and a small team of experts have been working on for several months. The plan is not likely to be unveiled until President Obama meets with Palestinian Authority President Mahmoud Abbas in March.

In his 40-minute speech to a packed auditorium at the Washington Convention Center, Netanyahu offered familiar complaints about the Palestinians' refusal to accept a Jewish state and repeated his opposition to the idea of using troops from the United States or other countries to help keep the peace between Arabs and Israelis if a deal was reached.

Still, the speech avoided any direct attacks against the Obama administration's foreign policy efforts -- a tone that stood in contrast to the somewhat icy showdown between Netanyahu and Obama on Monday. According to a transcript of the meeting, Netanyahu said he would never compromise on Israel's security while Obama warned that time was running out for Netanyahu and that "tough decisions are going to have to be made."

Netanyahu's government has also infuriated the White House in recent months by attacking senior Obama administration officials in unusually pointed terms. In January, Israeli Defense Minister Moshe Yaalon lambasted Kerry's Arab-Israeli peace efforts as naive.

"Secretary of State John Kerry - who has come to us determined and is acting out of an incomprehensible obsession and a messianic feeling - cannot teach me a single thing about the conflict with the Palestinians," Yaalon was quoted as saying. "The only thing that can save us is if Kerry wins the Nobel Prize and leaves us alone." 

State Department spokeswoman Jen Psaki blasted the reported comments as "offensive and inappropriate." The defense minister's office later offered a mild apology for the remarks.

In his speech Monday, Netanyahu repeated his willingness to accept a two-state solution to the Israeli-Palestinian dispute albeit with an undivided Jerusalem -- something Palestinians say they won't accept. He emphasized that a deal could have positive second order effects throughout the Middle East.

"Peace with the Palestinians would turn our relations with them and many Arab countries  into open and thriving relationships," he said, referring to technology sharing in the fields of education, medicine and horticulture. "The combination of Israeli innovation and Gulf entrepreneurship ... I think this combination could catapult the entire region forward."

In his own speech Monday night, Kerry tried to address the AIPAC crowd's skepticism about his peacemaking efforts. "Now, some folks have asked why I'm so committed to these negotiations, why I'm so convinced peace is possible," Kerry said. "This isn't about me. This is about the dreams of Israelis and the dignity of Palestinians."

The speech received mild applause and a short standing ovation after he exited the stage.

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