Why Is the US Sending $1 Billion to Ukraine?

By Colleen Curry March 4, 2014

From left, head of the Ukrainian UDAR (PUNCH) party and candidate in Ukraine's early presidential election Vitali Klitschko, Secretary of State John Kerry, Ukrainian member of parliament and businessman Petro Poroshenko, head of the Ukrainian nationalist Svoboda party Oleh Tyahnybok, and Ukrainian member of parliament for the Regions Party Sergiy Tigipko stand during their meeting in Kiev, March 4, 2014. (Kevin Lamarque/AFP/Getty Images)

Secretary of State John Kerry traveled to Ukraine today to show support for the country's new government amid mounting tension from Russia - and he showed up with a pretty big gift, too.

Kerry brought news of a $1 billion aid package the U.S. is giving Ukraine to help it get through the next few months of turmoil, according to U.S. Treasury Department.

The aid is made up of a $1 billion loan guarantee as well as technical and financial experts to help the Ukraine's bank and finance ministry with its financial affairs and help prepare the country for national elections in May.

News of the $1 billion loan guarantee was met with skepticism in this country:

To help explain why the United States would offer Ukraine $1 billion, Carnegie Endowment for International Peace expert Eugene Rumer explained the back story of Ukraine's financial woes. The story helps explain the current conflict between pro-Western and pro-Russian groups in Ukraine.

Rumer said Ukraine was in dire financial straits in November 2013. The International Monetary Fund offered financial assistance on the condition that it come with strict reforms for the country, but Russia stepped in and offered a cushy $22 billion without such reforms.

"Putin offered Ukraine a $22 billion aid package - with $15 billion in loans on very favorable terms and $7 billion in energy discounts, which today they've announced they've withdrawn," Rumer said.

Then-President Viktor Yanukovych accepted Russia's offer, a decision that played a large role in protestors calling for his ouster. Pro-European groups in Ukraine wanted to see the country more closely aligned with the West, not Russia.

Last month, Yanukovych fled Ukraine to seek shelter in Moscow and a new interim government was put in place in Ukraine. The U.S. and other Western countries are now offering support to the newly pro-Western government.

"The significance of this is Kerry is going to show political and moral support for the people's revolution and the new government," Rumer said. "He brings with him this loan guarantee which is, relatively speaking, well, a billion dollars is a billion dollars but it is a small step compared to Ukraine's needs. It's significant in that it says, if you do the right thing we're prepared to help you."

The Treasury Department said today that the U.S. was intent on helping Ukraine find new revenue sources and cut its spending on gas that it imports from Russia.

The U.S. "is ready to provide assistance and financing to help Ukrainian businesses find new export markets and adjust to trade pressures and to enhance energy efficiency, helping to reduce dependence on imported gas," according to the statement released by the Treasury.

"We're trying to show in a tangible way that we're prepared to put some of our money where our mouth has been," Rumer said.