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Kyiv: Russian Banks Fund Separatists

Combat vehicles with a Russian flag on one of them and gunmen on top are parked in downtown of Slovyansk, Ukraine, April 16, 2014.

Combat vehicles with a Russian flag on one of them and gunmen on top are parked in downtown of Slovyansk, Ukraine, April 16, 2014.

As Western powers consider introducing further sanctions against Russia, Ukraine's government says it has evidence that four Russian banks are involved in funding pro-Russian separatist agitation in eastern Ukraine and is urging Western politicians to sanction them.

U.S. President Barack Obama accused Russia this week of fomenting the separatist disturbances in Ukraine's restive eastern region, and he has warned Moscow of more financial sanctions.

Ukraine's government, which is struggling to contain a tide of separatism in the east that has seen armed pro-Russian agitators seize government buildings in nearly a dozen cities, says some of Russia's top banks, including Russia's largest, the state-owned Sberbank, are helping to fund the separatists.

Senior British Conservative politician John Whittingdale -- who is leading a U.K. parliamentary delegation to Kyiv -- said if Thursday's four-way talks in Geneva between senior diplomats from Russia, the European Union, the United States and Ukraine fail, then the West should go beyond previously announced financial sanctions on members of Russian President Vladimir Putin's inner circle and start targeting Russian banks.

"We were advised that there is evidence to suggest certain Russian banks have been directly involved in the financing of separatist occupations in eastern Ukraine. If the evidence is there that clearly in my view would justify taking action not just against individuals but also against Russian financial institutions," said Whittingdale. "Certainly in my view there is now a strong case for taking action against Russian financial institutions."

Speaking Thursday during his annual televised call-in program, Putin denied any Russian troops are assisting separatist agitation in eastern Ukraine. But for the first time, he admitted that Russian troops had entered the Black Sea peninsula of Crimea before locals there voted in a March referendum to break away from Ukraine and join Russia.

Putin also denounced the West's imposition last month of financial sanctions on his inner circle of advisers.

Ukraine's chief prosecutor, Oleg Makhnitskiy, told a Ukrainian television channel Wednesday that he has launched an investigation into Sberbank for funding pro-Moscow separatists. The bank is the third largest in Eastern Europe and has branches in Ukraine.

Ukrainian government officials told VOA the bank owned by Russia's energy giant Gazprom also is under investigation.

Whittingdale, a former private secretary to the late British Prime Minister Margaret Thatcher, said the West should move quickly if the Geneva talks fail to resolve the crisis over eastern Ukraine, but he admitted that for economic sanctions to be effective, all European Union nations would have to agree.

"Sanctions are only really effective, if you can obtain international agreement. There is no point in our closing the city of London, if money moves to Frankfurt," said Whittingdale.

Sign-off by all EU states could prove elusive.

European foreign ministers have started discussing which sanctions to impose on Russia in the event the Geneva talks fail and plan to meet next week. But the Financial Times newspaper Thursday reported Europe's resolve to impose tough economic sanctions on Moscow is cracking under corporate lobbying, as companies warn governments that any retaliation from the Kremlin could cost them dearly.

Russia also may waver, though, if faced by further Western action. According to Adrian Karatnycky, a foreign policy expert at the American think tank the Atlantic Council, Putin told Russian business executives not to worry about the prospect of sanctions during the standoff over Crimea because they should put country before profits.

"It was very clear Mr. Putin is willing to consider actions that can have a deleterious effect on the Russian market. But the question is how deep is his tolerance and how deep is the tolerance of the overall Russian elite to further such actions," said Karatnycky.

Next week, Russian resolve may be tested, if Western powers can reach an agreement on sanctions.

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