US, EU Promise More Aid for Ukraine If Reforms Continue

January 13, 2015 Updated: January 13, 2015

BRUSSELS—The United States on Tuesday reinforced Western assistance for war-torn Ukraine by promising up to $2 billion in loan guarantees if that effort is matched by economic and political reforms in Kiev.

The U.S. State Department said it intends to provide $1 billion in loan guarantees in the first half of 2015 and an additional $1 billion in the second half, if progress continues.

The commitment to help stave off a financial crisis comes a week after the European Union made a similar pledge of 1.8 billion euros ($2.1 billion) to strengthen the struggling nation’s resilience.

EU President Donald Tusk said Tuesday that Ukraine could also expect more humanitarian aid to deal with the problems.

Tusk added the bloc “must stay the course” with sanctions against Russia, at least until March.

Strife with Russia and a war against Russian-backed separatists in the east of the country is weighing on the Ukrainian economy.

On Tuesday, the World Bank estimated that the country’s economy had shrunk by 8.2 percent in 2014 and that it would contract by 2.3 percent this year. Ukrainian gold reserves have sunk to $7.5 billion, levels unseen since 2004.

Over the weekend, Russia said it reserved the right to seek early repayment from Ukraine of a $3 billion loan.

On top of that, the war is estimated to cost Kiev between $5 million and $10 million daily.

On Tuesday, an attack on a passenger bus in eastern Ukraine killed 11 people on the spot, likely dealing the final blow to hopes that a shaky cease-fire could take hold.

Under these dire conditions, any help for the struggling government is welcome. Both the United States and the 28-nation EU insisted the efforts had to be matched by political reforms centering on its energy sector and its fight against corruption.

Both Brussels and Washington said they have been encouraged by reform so far, but insisted it needed to continue.

From The Associated Press. Peter Leonard contributed to this report.