Gazprom Turns Up Heat On Kiev With $11bn Bill

Russia Has Best Hand In Ukraine Poker Game

Updated: 6:58pm UK, Tuesday 22 April 2014

By By Sam Kiley, Foreign Affairs Editor in Donetsk

If the Ukrainian crisis was a poker game, Russia holds a royal flush, the Kiev government and her allies not much more than a pair. And that's for every hand played, for now.

Since the annexation of Crimea it has been Vladimir Putin's choice as to whether to fold or call or raise and with every round his pot appears to be getting richer.

In the long term, though, Russia knows it could lose heavily.

The question is: When will the Kremlin decide to cash in its winnings and celebrate a return as a world power with a hearty round of chilled vodka at the bar?

US Vice President Joe Biden, on a visit to Kiev, said "time is short" for Russia to make progress on its commitment at Geneva last week to help defuse the crisis in Ukraine by signalling to its proxy militia (and the Russian commandos alongside them) to evacuate the buildings they have seized across the east of the country.

That isn't the view from Moscow - or from the sandbagged municipal centres, where the men in balaclavas, known locally as "the green men", are reinforcing their defences, not tearing them down.

Sure, Russia faces an increase in sanctions from Europe which may bite into an economy already suffering capital flight, inflation and reduced growth.

But Mr Putin knows that more sanctions are going to cut into Europe too - possibly slowing growth and the recovery from recession that in any case is looking fragile.

Individual countries in the 28-member European Union have been conducting analyses of how damaging broad sanctions against Russia would be.

The City of London will be anxious indeed - it runs on the fuel of  "few questions asked" capital injections from oligarchs who have gouged the countries of the former Soviet Union.

"Stop talking and start acting" said the US vice president.

In Donetsk the "meh" from the Kremlin was almost audible.

"No nation should threaten its neighbours by amassing troops along the border. We call on Russia to pull these forces," he said after meeting Ukrainian Prime Minister Arseny Yatseniuk.

"We have been clear that more provocative behaviour by Russia will lead to more costs and to greater isolation."

In Moscow, once senior officials had figured out who this "Mr Biden" was - a man without portfolio - minds have already been focussed on how to face down the European sanctions which have been threatened now for weeks.

Dmitry Medvedev, the Prime Minister who channels Mr Putin as his avatar, said Russia was already looking for diversified markets for its gas, namely China, and that sanctions threats were a "bluff".

Mr Putin's popularity is soaring up to and over 90% since he grabbed Crimea amid red-faced blustering from the international community.

His generals have harnessed some of the finest chess minds in a game that has left his opponents gasping. The government now enjoys untrammelled authoritarian power.

In Russia the opposition press was silenced before the Crimean operations.

Now the media there and in the east of Ukraine pumps out lies about neo-Nazis running the Ukrainian government in league with the CIA - convincing enough people that backing the pro-Russian separatists, who now only admit to being "federalists", is an existential necessity.

Mr Yatseniuk said Russian special forces are operating in eastern Ukraine to undermine a presidential election due on May 25 and he called on Moscow to pull them out.

"Everything that is now happening in the east and which Russia is supporting is aimed at wrecking the presidential election," Mr Yatseniuk said.

And that is the Kremlin's ace.

In a month's time Ukraine will not be able to hold legitimate elections in the east of the country because the separatists and their Russian sponsors will not let them.

Instead they are threatening to hold referenda in the middle of May - just as in Crimea - which one can confidently predict will result in a huge pro-Russian majority for independence or annexation into the Russian Motherland.

By the end of the month the Kremlin will be able to step up the chaos and divisions - probably even revving the engines of tanks and mobile artillery on the borders to signal that it may rush to the "aid" of "persecuted" ethnic Russians in Ukrainian territory.

This is the point at which it will be in Russia's interests to cash in on the game it has been playing by forcing its own agenda on Kiev, and getting the West to turn its face away from Ukraine's flirtation with formal association with Nato and the EU.

The alternative will be a return to cold war and economic embargo. Ordinary Russian's won't like that – they have got used to Armani.

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