On Thursday April 17, US Secretary of State John Kerry said: "We fully expect the Russians… to demonstrate their seriousness by insisting that the pro-Russian separatists who they’ve been supporting lay down their arms [and] leave the buildings” in eastern Ukraine, he said. “I made clear to Foreign Minister Lavrov today that if we are not able to see progress… this weekend, then we will have no choice but to impose further costs on Russia."
The weekend came and went and no pro-Russian militia in eastern Ukraine heeded Kerry's words. On the contrary – with fairly open Russian logistical and intelligence support, the militias strengthened their hold on the area.
So far, Kerry has not made good on his threat and no further cost was imposed on Russia. Nearly a month earlier, on March 24, President Barack Obama said: "Europe and America are united in our support of the Ukrainian government and Ukrainian people… We are united in imposing a cost on Russia for its actions so far.” On Tuesday April 22, the Washington Post ran a lead article headlined "Obama, disregarding his own red line, dithers on Ukraine." It said:
“Despite Mr. Kerry’s clear words, sanctions that have been prepared against cronies of Mr. Putin and companies involved in his Ukraine adventure remain on ice."
US threat of the “scarlet letter” hangs in the air
This assertion by the capital's most influential newspaper was not entirely accurate and did not go unanswered. In Tokyo, President Obama said Thursday, April 24, that the US had further sanctions against Russia “teed up,” and accused Moscow of failing to halt actions by pro-Russian militants in Ukraine.
The president was underlining a threat first implied on April 17 by the Ukraine's government’s claim of evidence adduced by its own investigation that four Russian banks were involved in funding pro-Russian separatist agitation in eastern Ukraine.
Ukraine's chief prosecutor, Oleg Makhnitskiy, told a Ukrainian television channel that he had launched an investigation into Sberbank for funding pro-Moscow separatists.
The bank is the third largest in Eastern Europe and has branches in Ukraine.
Kiev government officials told the Voice of America that the bank owned by Russia's energy giant Gazprom also is under investigation.
In truth, no one credited the interim government’s claims. Clearly, any “investigation” by Kiev into Russia’s two great economic power centers and President Vladimir Putin’s own financial interests, would have been shut down promptly by Moscow’s secret services.
But the prosecutor’s words were interpreted in high-placed Russian and US quarters, according to DEBKA Weekly's sources in Washington and Moscow, as the Obama administration’s first veiled threat to wield America’s ultimate financial weapon against Russia’s financial and monetary system – the “scarlet letter.”
Restraining Kiev leaders as US infrastructure put in place
This clause, devised under Section 311 of US Patriot Act, empowers the US Treasury to order any bank suspected of money-laundering or underwriting terrorist activities – a roundly inclusive offence – to be ostracized by the world’s banking and financial community. For a Russia banking institution, even outside the United States, this would be a death warrant. European banks, not daring to defy the US regulators, would suspend business ties with any Russian bank or firm thus tainted.
The ostensible Kiev “investigation” was in fact Obama’s way of putting Putin on notice to halt Russian intervention in Ukraine after annexing Crimea, or else find himself up against a financial war with Washington that would grow out of the unresolved Ukraine dispute.
The infrastructure was put in place in Kiev – first by CIA Director John Brennan during an undisclosed two-day visit on April 12-13, then by Vice President Joe Biden who arrived on April 22.
The two high American officials had two tasks: The lesser important was to hold in check the excitable rulers of Ukraine – President Oleksander Turchinov and Prime Minister Arseniy Yatsenyuk – who are prone to such outrageous comments as: Putin "has a dream to restore the Soviet Union” or “God knows what is the final destination,” and also make sure they don’t rock the boat with superfluous provocations.
Gearing up for the US-Russian contest to come
To keep Kiev in line, Biden held American purse strings tight, promising no more than a scrappy $8 million in military aid and $50 million in financial aid. This is just enough for the upkeep of government offices in Maidan Square and limited Ukrainian counterintelligence service operations, but nowhere near the amounts needed to support the Ukrainian administration, army and other security forces.
Brennan and Biden’s main task was to take a look at the financial-intelligence war room the Obama administration has established secretly in Kiev and make sure it is ready for action when the go signal comes down from the White House.
The CIA Chief’s visit to Kiev was exposed on April 18 by Russian Foreign Minister Sergey Lavrov. One of his aides "volunteered" to tell the newspaper Vzgliad that Brennan had not come to oversee the failed "anti-terrorist" operations conducted by the Ukrainian authorities against pro-Russian separatists, but to look into the disappearance of and rescue some twenty Greystone Ltd mercenaries.
Hundreds of mercenaries working for Greystone (a subsidiary of Academi, formerly Blackwater), were reported by Russian media to have been in the country from March 4, operating within Ukraine’s special forces.
Both sides sharpen swords
By his disclosure, Lavrov let Washington know that Moscow keeps a close eye on the undercover US operation in Kiev and, should the new war room go operational, there will be more revelations.
President Obama obviously never expected the Geneva agreement to de-escalate the Ukraine crisis after it was signed on April 17 between John Kerry, Sergei Lavrov and EU Foreign Policy Coordinator Catherine Ashton.
He commented then: “My hope is that we actually do see follow-through over the next several days, but I don't think — given past performance — that we can count on that."
That was apparently the first intimation that the US and Russian presidents were in advanced preparations for the head-to-head duel to come.
The nature of that contest is explored in the next article.