The prospective aid package, which top U.S. and EU diplomats discussed on the sidelines of a security conference in Munich over the weekend, would be the West's most significant move to date to reopen the geopolitical struggle for Kiev since Ukrainian President Viktor Yanukovych turned his back on an EU economic pact and, instead, signed a deal with Russia for $15 billion in aid.
Wary of Mr. Yanukovych's shake-up of his cabinet to placate protesters, Russia last week said it would suspend a tranche of that aid—a move that could present an opening for a renewed Western bid for influence.
At the weekend conference, U.S., Russian and European officials traded barbs over the crisis in Ukraine.
A top Ukrainian protest leader, meanwhile, left the country after he said he was kidnapped and tortured by men who accused him of being a U.S. agent.
In an interview with The Wall Street Journal, EU foreign policy chief Catherine Ashton said Western powers were working on a financial plan for Ukraine whose numbers "won't be small" and won't hinge on Kiev first agreeing upon a long-term International Monetary Fund agreement, whose financial conditions Kiev has had difficulty complying with.
However, she said the money was contingent on the new Ukrainian government pursuing economic and political reforms.
Political Unrest in Ukraine
U.S. officials said the goal was to convince Mr. Yanukovych to make a series of political reforms, including appointing a "true" technocratic government that would then start to make the tough economic changes sought by the IMF.
One senior U.S. official briefed on the discussions called it a "big carrot," offering Mr. Yanukovych an alternative path that could avert further violence and a costly default, and blunt Moscow's ability to control Ukraine economically and politically.
U.S. and European officials said the size and sequencing of the package have yet to be worked out.
The geopolitical contest for influence in Ukraine is already playing out in tensions on the streets of Kiev.
Opponents of Mr. Yanukovych's move toward closer relations with Moscow allege a broad pattern of violence and intimidation by thugs and uniformed police.
Often their captors want to know who is paying them to protest.
One primary suspect has been the U.S., which the Kremlin and authorities here accuse of bankrolling the country's disorder.
In an interview with the Journal, Ukrainian protest leader Dmytro Bulatov described being beaten, tortured and having part of his ear cut off after being abducted by several men.
During his week of captivity, he said, his interrogators wanted to know more about his activist group—a rapid-reaction force of sorts for Ukraine protest movement—and to what extent the U.S. paid and instructed him to lead demonstrations against the government.
The U.S. embassy in Kiev says it has met with politicians and activists of all ideological kinds to monitor the crisis, and in that regard, did meet Mr. Bulatov in January.
But it denies providing any funding to protest groups such as Mr. Bulatov's that have sprung up during the protests.
The government in Kiev says its opponents are concocting stories of brutality to galvanize support at home and draw sympathy from the West.
"Physically this man is in a good condition, the only thing he has is a scratch on one of his cheeks," Ukrainian Foreign Minister Leonid Kozhara told Al Jazeera at the Munich conference.
"So, let's wait for the investigation that will reveal specific facts."
Whether Ukrainian leaders can meet the political and economic conditions of the proposed Western aid package is far from certain.
U.S. diplomats say the plan hinges on a peaceful resolution to Ukraine's political crisis and a power-sharing deal between Mr. Yanukovych and his critics.
Talks over power-sharing so far have ended in acrimony and deadlock, with the president calling in sick last week and saying he had done all he could to appease his critics.
While Mr. Yanukovych dismissed his government and offered posts to the opposition, they say the moves are meaningless because the presidency in Ukraine holds most of the power.
Moreover, it isn't clear Ukraine's opposition leaders can persuade protesters to stomach a compromise with Mr. Yanukovych, who is widely maligned for attempting a crackdown on critics.
Demonstrators responded by throwing up barricades in the streets of Kiev and occupying government buildings.
They have so far refused appeals from the government to leave the capital and are pressing for snap elections in Ukraine.
In the interview, Baroness Ashton distanced herself from any demand for early presidential elections, now scheduled for next year.
She said that it is up to Ukrainian politicians to choose election timing, but that the EU and U.S. could provide significant funding if the two sides can climb back from confrontation.
For Mr. Yanukovych, the package could offer a lifeline to a government that is on the brink of default.
Last week, Russia announced it is holding up the next tranche of a $15 billion package, after Mr. Yanukovych dismissed his prime minister, who was close to Moscow.
Secretary of State John Kerry discussed prospects for the short-term aid package with Baroness Ashton and other EU leaders on the sidelines of the conference in Munich, officials said.
In those discussions, Mr. Kerry made clear that the aid would be "conditional on having real reform and a real transition in Ukraine," a senior U.S. official said.
Mr. Kerry also discussed the possible package with members of the opposition during a meeting on Saturday.
It was among the highest-profile sit-downs for the opposition leaders since large-scale antigovernment protests started in November after Ukrainian President Viktor Yanukovych walked away from a sweeping EU economic and political deal.
"The message to the opposition…is that through dialogue, you're starting to get the pieces put in place for a peaceful political solution. Stick with it and we will keep pressuring the government," the official added.
Mr. Kerry also met with Mr. Kozhara, expressing "grave concerns" about human-rights violations by authorities.
The U.S.'s intention is to negotiate the terms of that short-term economic support and then to provide the aid in tandem with the EU and other countries such as Norway, and possibly Turkey, Japan and others, U.S. officials said.
Baroness Ashton said there would be "different stages" of possible support, the first of which would deal with short-term needs.
She said that it was for Ukraine's new government to identify in detail exactly what it needed help with but that the eventual package might not only be money.
"It may be guarantees. It may be the prospect of investment. It may just simply be stability for the currency and so on," she said.
The EU and U.S. are "developing a plan—a Ukrainian Plan, I have suggested they call it—that looks at what do we need to do in different parts of the economy right now to make things better," she said.
The U.S.'s expectation is that a transitional government would at least start to implement the reforms sought by the IMF, U.S. officials said.
"Nobody is going to give them money if they're not doing the economic reform as well as the political reform, because then it is money down the rat hole," the senior U.S. official said.
"The point is to say to them we will be with you if you walk this tough economic path and we're not going to let you fall into default as you do it."
U.S. officials said the interim aid package could be put together relatively quickly, in as little as two weeks, once the West knows who will sit on the transitional government and that it will be empowered to work with the IMF.
"We're just at the beginning of analyzing the options," a senior U.S. official said.
U.S. officials say they knew from the start that the U.S. and EU wouldn't and couldn't match the Russian financial package to lure Mr. Yanukovych away from the EU.
Russia's package didn't have strings attached on economic overhauls.
U.S. officials described the aid as an effort by Moscow to make Ukraine more economically and politically dependent, pointing to terms that would fix gas prices for only a limited period and required Ukraine to increase the amount of gas it buys from Russia, undercutting Kiev's energy sovereignty.
The IMF has set out a series of reforms that include raising natural gas prices and devaluing Ukraine's currency.
U.S. officials believe it could be easier for a transitional government to raise natural gas prices in the spring as temperatures rise.
Likewise, recent market turmoil has already reduced the value of Ukraine's currency, potentially making a further devaluation less political painful to implement, U.S. officials said.
Source: The Wall Street Journal