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G7 warns Russia of more sanctions if Ukraine crisis escalates

by Steve Holland and Aleksandar Vasovic, Reuters

March 24, 2014 | 1:33 pm

Russian President Vladimir Putin in Moscow's Kremlin on March 24. Photo by Alexei Nikolskiy/RIA Novosti/Kremlin/Reuters

Russian President Vladimir Putin in Moscow's Kremlin on March 24. Photo by Alexei Nikolskiy/RIA Novosti/Kremlin/Reuters

President Barack Obama and major industrialized allies warned Russia on Monday it faced damaging economic sanctions if President Vladimir Putin takes further action to destabilize Ukraine following the seizure of Crimea.

Leaders of the Group of Seven summit, meeting without Russia, agreed to hold their own summit this year instead of attending a planned G8 meeting in the Russian Olympic venue of Sochi, just along the Black Sea from Crimea, and to suspend their participation in the G8 until Russia changes course.

On a day when Kiev ordered its remaining troops to withdraw from Crimea and Russian forces used force to capture a marine base and a landing ship, leaders of the United States, Germany, France, Britain, Italy, Japan and Canada condemned what they called "Russia's illegal attempt to annex Crimea in contravention of international law".

They also agreed to work together to reduce their dependence on Russian oil and gas.

"We remain ready to intensify actions including coordinated sectoral sanctions that will have an increasingly significant impact on the Russian economy, if Russia continues to escalate this situation," they said in a joint statement.

The G7 leaders, who met on the sidelines of a nuclear security summit in The Hague, said they would meet again in Brussels in early June, the first time since Russia joined the G8 in 1998 that it will have been shut out of the annual summit of industrialized democracies.

Obama, who has imposed tougher sanctions on Moscow than European leaders over its takeover of the strategic peninsula, told reporters: "Europe and America are united in our support of the Ukrainian government and the Ukrainian people".

"We're united in imposing a cost on Russia for its actions so far," he said of the visa bans and asset freezes slapped on senior Russian and Crimean officials.

Russian Foreign Minister Sergei Lavrov sought to play down the G8 boycott.

"If our Western partners believe the format has exhausted itself, we don't cling to this format. We don't believe it will be a big problem if it doesn't convene," he told reporters.

RESISTANCE ENDED

Earlier on Monday, Russian troops forced their way into a Ukrainian marine base in the port of Feodosia, overrunning one of the last remaining symbols of resistance, and later stormed and captured a Ukrainian landing ship, firing warning shots and stun grenades. No casualties were reported in either incident.

In Kiev, acting president Oleksander Turchinov told parliament the remaining Ukrainian troops and their families would be pulled out of the region in the face of "threats to the lives and health of our service personnel".

That effectively ends any Ukrainian resistance, less than a month since Putin claimed Russia's right to intervene militarily on its neighbors' territory.

White House officials accompanying Obama expressed concern on Monday at what they said was a Russian troop buildup near Ukraine and warned that any further military intervention would trigger wider sanctions than the measures taken so far.

A U.S.... official said Moscow had some 20,000 soldiers near the border. Russian intervention in eastern or southern Ukraine would be the clearest trigger for additional sanctions, as would violence in Crimea, another U.S.... official said.

NATO also fears Putin may have designs on Transdniestria, a part of another former Soviet republic, Moldova.

Russia has said it is complying with international agreements on troop movements and has no plans to invade.

RUSSIA-UKRAINE TALKS

In what has become the biggest East-West confrontation since the Cold War, the United States and the European Union have imposed personal sanctions on some of Putin's closest political and business allies. But they have held back so far from measures designed to hit Russia's wider economy.

Obama also discussed the crisis at a meeting in The Hague with Chinese President Xi Jinping, who has voiced support for Ukraine's sovereignty but refrained from criticizing Russia.

The West wants Beijing's diplomatic support in an effort to restrain Putin but while Xi called for a political solution, he did not harden China's position towards Moscow.

Russia formally annexed Crimea on March 21, five days after newly-installed pro-Moscow regional leaders held a referendum that yielded an overwhelming vote to join Russia. Kiev and the West denounced the annexation as illegal.

In one sign of a possible easing of tension, Lavrov agreed to hold a first meeting with his Ukrainian counterpart, Andriy Deshchytsya on the sidelines of the nuclear security summit.

The first 50 out of 100 observers dispatched by the pan-European OSCE security watchdog arrived in Ukraine on Monday to monitor potential trouble spots and report back to the 54-nation organization. Russia relented late last week and agreed on a mandate after prolonged wrangling, but the monitors will not be allowed to enter Crimea.

FURTHER COSTS

Western officials are now focused less on persuading Putin to relinquish Crimea - a goal that seems beyond reach - than on deterring him from seizing other parts of Ukraine.

Persuading Europeans to sign on to tougher sanctions could be difficult. The EU does 10 times as much trade with Russia as the United States, and is the biggest customer for Russian oil and gas. The EU's 28 members include countries with widely varying relationships to Moscow.

Central and east European countries that were once under Moscow's domination and have joined the EU in the last decade are mostly urging caution due to the risk to their economies.

But German Chancellor Angela Merkel, the EU's most powerful leader, has taken a tough line with Putin and supported EU moves to reduce the bloc's long-term dependence on Russian energy.

The seizure of Crimea has been largely bloodless, apart from one Ukrainian soldier and one pro-Moscow militia member killed in a shootout last Tuesday.

In Feodosia, Ukrainian troops hugged each other in farewell on Monday after their base was overrun. Some chanted "Hurra! Hurra!" in defiance. One marine in full uniform who declined to identify himself wept and blamed the government in Kiev for the chaotic end to the standoff.

"Yesterday we had an agreement: we would lower our flag and the Russians would raise theirs. And this morning the Russians attacked, firing live ammunition. We had no weapons. We did not fire a round," said one marine, Ruslan, who was with his wife Katya and 9-month-old son.

Despite the disruption to East-West relations, Washington wants other diplomatic business with Moscow to continue. U.S... Secretary of State John Kerry held talks with Lavrov after meeting the head of the Organization for the Prohibition of Chemical Weapons, overseeing the destruction of Syria's toxic stockpile in action sponsored jointly by Washington and Moscow.

Russia hit back symbolically at Canada, announcing personal sanctions against 13 Canadian officials in retaliation for Ottawa's role in Western sanctions so far. It has already taken similar measures against senior U.S... Congress members but not yet European officials.

Additional reporting by Anthony Deutsch, Jeff Mason, Justyna Pawlak and Andreas Rinke in The Hague, Gabriela Baczynska in Simferopol, Natalia Zinets in Kiev; writing by Paul Taylor; editing by David Stamp and Philippa Fletcher

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