US and six other economic powers also scrapped the G8 summit to be hosted by Russia in Sochi in June to build pressure on Russian President Vladimir Putin against his military action in Ukraine.

At an emergency summit in Hague on Monday, the leaders of US, Britain, Canada, Germany, France, Italy and Japan - who met for the first time since Russia was admitted to their exclusive club 16 years ago, cancelled the planned G8 summit and decided to convene without Russia in Brussels.

"We will suspend our participation in the G8 until Russia changes course and the environment comes back to where the G8 is able to have a meaningful discussion and will meet again in G7 format at the same time as planned, in June 2014, in Brussels, to discuss the broad agenda we have together," the G7 countries said in a joint statement.
The G7 leaders also reaffirmed their support for Ukraine's sovereignty, territorial integrity and independence, and pledged to assist the country as it seeks to restore unity, democracy and political stability based on the interim government's reform agenda.
They deplored the referendum held in Crimea on its future status and subsequent Russian annexation of the Ukrainian autonomous region a week ago as "illegal and in contravention of international law".

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

They also agreed their energy ministers would work together to reduce dependence on Russian oil and gas and increase energy security.

"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.

They also urged the International Monetary Fund to reach a rapid agreement with Ukraine to unlock urgently needed financial aid for the country's shattered economy.

Obama, who has imposed tougher sanctions on Moscow than European leaders over its takeover of the strategic Crimean 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 played down the G8 snub.

"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.


In Washington, both Republicans and Obama's fellow Democrats said they were disappointed the G7 had not gone further.

In the Senate, which is considering an aid package to Ukraine this week, lawmakers said Russia should be barred permanently, not temporarily, from the G8.

A State Department spokeswoman highlighted the economic damage Russia has already suffered due to its action in Crimea, a Russian-majority region, after the fall of Ukraine's pro-Russian President to months of mass protests.

"The Russian stock market's down 20 percent this year already. That's the worst performing index in the world," spokeswoman

Maria Harf told reporters. "That's $75 billion of market value wiped away, due in large part to the power and reach of our sanctions.

"The Russian currency is near an all-time low as investors have lost confidence in the economy and fled into dollars."

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. They 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 Crimea 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 neighbour's territory.

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

One US official said Moscow had massed 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 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.


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 defuse tensions. Russia relented late last week and agreed on a mandate after prolonged wrangling, but the monitors will not be allowed to enter Crimea.


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, which was under Moscow's control within the Soviet Union until its break-up in 1991.

Persuading Europeans to sign on to tougher sanctions could be difficult. The EU does 10 times as much trade with Russia as 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.

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.

Despite the disruption to East-West relations, Washington wants other diplomatic business with Moscow to continue. US Secretary of State John Kerry held talks with Lavrov after meeting the head of the Organisation 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. Moscow has already taken similar measures against senior US Congress members but not yet European officials.


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