After initially scoffing at a decision by the United States and
its allies to boycott a planned Group of Eight summit in Sochi and
hold a G7 summit instead without Russia, the Kremlin said it was
keen to maintain contact with G8 partners.
"The Russian side continues to be ready to have such contacts at all
levels, including the top level. We are interested in such
contacts," President Vladimir Putin's spokesman, Dmitry Peskov, told
Interfax news agency.
British Prime Minister David Cameron signalled meanwhile that while
the West did not accept Putin's annexation of Crimea, it would take
more severe measures against sectors of the Russian economy only if
he went further.
"There's a view that the status quo is unacceptable, but there's
then another very, very strong view that any further steps into
Eastern Ukraine would be even more serious and would result in much
greater sanctions," Cameron told reporters in The Hague when asked
whether the West accepted that Crimea was lost.
While maintaining a barrage of hostility against NATO and the United
States in its state-owned media, Moscow made two conciliatory
gestures on Monday as its deputy economy minister acknowledged up to
$70 billion in capital may have fled his country in the first
quarter of the year.
Foreign Minister Sergei Lavrov met his Ukrainian counterpart Andriy
Deshchytsia for the first time on the sidelines of a nuclear safety
summit in The Hague, even though Russia does not recognise the Kiev
Moscow also allowed the first monitors from the pan-European
security watchdog OSCE to begin work in Ukraine after prolonged
wrangling over their mandate, which Russia says excludes Crimea.
The Ukrainian Foreign Ministry said Deshchytsia protested at the
annexation of Crimea and Kiev regarded the territory as its own.
Lavrov said Russia did not intend to use force in eastern and
southern regions of Ukraine, and "the two sides agreed not to fuel
further escalation in the Crimea problem that could cause
casualties", it said.
Ukraine ordered its remaining forces in Crimea to withdraw on Monday
for their own safety after Russian forces fired warning shots and
used stun grenades when they stormed a marine base and a landing
ship. There were no casualties.
Kiev also backed away from a threat to cut off water and electricity
supplies to the Black Sea peninsula, which Russia annexed last week
despite Ukrainian and Western protests.
Putin's spokesman Peskov reiterated that since Russia's Black Sea
fleet, based in Crimea, was no longer on Ukrainian territory, there
were no legal grounds for continuing to give Ukraine a discount in
the price it pays for Russian gas, especially since he said Kiev was
not paying its arrears.
U.S. and European officials said no one pressed for wider economic
sanctions now against Moscow when President Barack Obama met leaders
of Germany, France, Britain, Italy, Japan and Canada. But they
agreed that Russian intervention in eastern or southern Ukraine
would trigger additional sanctions, as would violence in Crimea, a
U.S. official said.
"The biggest hammer that can drop is sectoral sanctions. The
clearest trigger for those is (intervention in) eastern and southern
Ukraine," the official said.
The United States sought to reassure Kiev on Tuesday that this did
not mean it was giving up on Crimea.
"Ukraine and the United States emphasize that they will not
recognize Russia's illegal attempt to annex Crimea," the two
countries said in a joint statement.
"Crimea is an integral part of Ukraine. The United States will
continue to help Ukraine affirm its sovereignty and territorial
[to top of second column]
The G7 leaders also called on the International Monetary Fund to
reach agreement swiftly on a financial support package for Ukraine's
shattered economy, which would unlock additional aid from the
European Union and Washington.
Both the West and Russia sought to
woo other key nations present in The Hague.
Obama, who discussed the Ukraine crisis with Chinese President Xi
Jinping on Monday, met President Nursultan Nazarbayev of Kazakhstan,
which is part of a customs union with Russia but is also seeking to
join the World Trade Organisation.
Nazarbayev, a veteran of the last ruling Communist politburo before
the collapse of the Soviet Union in 1991, expressed understanding
for Russia's position in a telephone call with Putin on March 10.
French President Francois Hollande met the Kazakh leader on Monday
as part of Western efforts to sway him.
Lavrov meanwhile sought support from foreign ministers of the BRICS
grouping of emerging economic powers — Brazil, Russia, India, China
and South Africa.
In a joint statement that did not mention Ukraine or take a position
on the annexation of Crimea, they said: "The escalation of hostile
language, sanctions and counter-sanctions, and force does not
contribute to a sustainable and peaceful solution, according to
international law, including the principles and purposes of the
United Nations Charter."
NATO and U.S. officials continued to voice concern about the massing
of Russian troops near eastern Ukraine for what Moscow says are
routine military exercises.
European diplomats said tentative signs that Putin may have decided
to go no further than Crimea in his declared campaign to protect
ethnic Russians in Ukraine and other former Soviet republics may
reflect concern about the economic consequences.
The Russian Economy Ministry said on Monday that growth in February
was close to zero, inflation was rising fast, and capital was
pouring out of the country.
"There won't be a recession, but there is a problem of stagnation:
its length and depth. Unfortunately the investment slump is
continuing. I'm not ready to say how long it will continue," deputy
Economy Minister Andrei Klepach said.
Russian shares and the rouble rose moderately on Tuesday on the
absence of new G7 sanctions.
The crisis is also taking a toll in Western Europe. German business
morale dropped for the first time in five months in March as firms
in Europe's largest economy began to worry that a standoff with
Russia and further sanctions over Ukraine would hurt them in a key
market, the Munich-based Ifo institute said.
(Additional reporting by Jeff Mason and Steve Holland in The Hague,
Lidia Kelly and Darya Korsunskaya in Moscow, Richard Balmforth in
Kiev; writing by Paul Taylor; editing by Philippa Fletcher)
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