The U.S. threatened Russia with more sanctions for its incursion into Ukraine as global finance chiefs debated how best to deliver aid to the beleaguered former Soviet republic.
With Group of Seven finance ministers and central bankers meeting yesterday in Washington, U.S. Treasury Secretary Jacob J. Lew delivered the warning in talks with his Russian counterpart, Anton Siluanov. It was made just hours after Russian President Vladimir Putin threatened to halt natural gas shipments to Ukraine.
"Secretary Lew emphasized that Russia's ongoing occupation and purported annexation of Crimea is illegal and illegitimate," the Treasury said in a statement after the officials met. "The United States is prepared to impose additional significant sanctions on Russia if it continues to escalate the situation in Ukraine."
The standoff between Russia and the U.S. and its European allies is dominating talks of finance chiefs gathering for the spring meetings of the International Monetary Fund and World Bank, which start today. World Bank President Jim Yong Kim said yesterday that a prolonged crisis could cause the Russian economy to shrink as much as 1.8 percent this year.
The G-7 finance ministers and central bankers had a "discussion of the situation in Ukraine, its financing needs and the international response," they said in a statement after their talks in Washington yesterday. The G-7 comprises the U.S., U.K., Canada, France, Germany, Italy and Japan. The broader Group of 20, which also includes major emerging markets, will convene today with Russia among the participants.
The IMF is looking to provide Ukraine between $14 billion and $18 billion of financial aid. Managing Director Christine Lagarde told Bloomberg Television's Tom Keene yesterday that she has "overwhelming support" from her membership for the steps the lender is taking.
Ukraine's economy, which has endured two contractions since 2008, is already facing a recession the government says will wipe out 3 percent of gross domestic product this year.
The hryvnia has lost 35 percent against the dollar in 2014, the world's worst performance among currencies tracked by Bloomberg.
"The question is not to discuss sanctions, the question is to implement in the best conditions possible, in the fastest, most effective way, the plan crafted by the IMF" for Ukraine, French Finance Minister Michel Sapin said yesterday. "We're here to try to implement in the most consensual way the plan of the IMF."
Putin's threat to shut off gas deliveries through Ukraine has exacerbated the tension. With some 40,000 combat-ready troops massing along the border with Ukraine, Russia is trying to subvert its neighbor's government and force it to devolve power, North Atlantic Treaty Organization Secretary-General Anders Fogh Rasmussen said yesterday in Prague.
Putin said Ukraine is heading toward default and that Russian gas-export monopoly OAO Gazprom would halt shipments through the country if it continued to fall behind in payments, according to a letter he wrote to 18 heads of European states.
