©AFP A Ukrainian policeman guards an armoured vehicle near eastern city of Slavyansk on Friday
Western leaders are to "move swiftly" to impose additional sanctions on Russia, the White House announced on Friday night.
"We reiterate our strong condemnation of Russia's illegal attempt to annex Crimea and Sevastopol, which we do not recognise. We will now follow through on the full legal and practical consequences of this illegal annexation, including but not limited to the economic, trade and financial areas," a statement from G7 leaders said.
"[Russia had] continued to escalate tensions by increasingly concerning rhetoric and ongoing threatening military maneuvers on Ukraine's border," the statement said.
"We reiterate our strong condemnation of Russia's illegal attempt to annex Crimea and Sevastopol, which we do not recognize."
It added: "We have now agreed that we will move swiftly to impose additional sanctions on Russia. Given the urgency of securing the opportunity for a successful and peaceful democratic vote next month in Ukraine's presidential elections, we have committed to act urgently to intensify targeted sanctions and measures to increase the costs of Russia's actions."
Earlier on Friday, western leaders accused Russia of breaking last week's diplomatic agreement on Ukraine and of escalating tensions in the east of the country.
More
On this story
On this topic
The US and several key European governments, led by German Chancellor Angela Merkel, hardened their stance on Moscow in a co-ordinated bid to deter Russian troops from moving into Ukraine. A senior US official earlier said Washington could take action against Moscow as early as Monday.
Adding to a series of increases in regional tension, a bus carrying international military observers was held by separatists because they were believed to have a spy among them from the pro-Western government in Kiev, Vyacheslav Ponomarev, the self-declared mayor of Slavyansk said.
Germany's defence minister Ursula von der Leyen told broadcaster ARD that the government was using all diplomatic channels to re-establish contact with the missing soldiers.
She said: "Since noon today we've had no contact [with the OSCE observers], not even with the three Bundeswehr soldiers and their interpreter. They are on a neutral, international mission to give the international community an objective picture of the situation."
And the Pentagon said on Friday that Russian aircraft had entered Ukrainian airspace on several occasions in the past 24 hours.
Ms Merkel publicly warned Russia that it faced imminent sanctions because it had failed to rein in separatist groups that have occupied government buildings in eastern cities, part of the agreement reached in last week's Geneva accord to calm tensions.
"I spoke to the Russian president this morning and made clear again that ... Ukraine has taken a whole series of steps to implement the Geneva accord but on the other side I see no Russian backing for the accord," Ms Merkel said.
"Russia has the power, or could have the power, to bring the separatists on to a peaceful path of discussions ... but such signals are unfortunately lacking."
Until now, Ms Merkel had been signalling that Germany would support bigger penalties on Moscow only in the event of direct Russian aggression.
However, her latest comments suggest she had judged that President Vladimir Putin's failure to implement the Geneva accord warranted an increase in sanctions.
Ms Merkel's comments came after US President Barack Obama spoke on the phone with her and the leaders of France, Italy and the UK to galvanise support for a new wave of sanctions against Moscow.
UK officials said the five leaders had agreed that new measures would be needed. "While they continued to hold open the door to a diplomatic resolution of this crisis, based on the Geneva agreement, the five leaders agreed that in the light of Russia's refusal to support the process, an extension of the current targeted sanctions would need to be implemented, in conjunction with other G7 leaders and with European partners," an official said.
Speaking on a visit to South Korea, Mr Obama said the US had "a series of additional targeted sanctions that are ready to go", but added: "We've been trying to continually raise the cost for Russia of their actions, while leaving open the possibility of their moving in a different direction."
Neither the US nor the EU appears to be willing yet to impose broader economic sanctions on Russia. In the EU's case, it is likely to add the names of 15 Russian or Crimean individuals to people already facing travel bans and asset freezes. The US is also considering adding some banks or state-owned companies to the list of sanctioned entities. Mr Obama is in Asia until Monday, which could affect the timing of any US announcement about sanctions.
However, the political fallout from the crisis and the existing financial sanctions are already damaging Russia's struggling economy as business and investor confidence rapidly deteriorates, leaving its companies with little access to international markets.
The economy's vulnerabilities were underscored on Friday when the central bank unexpectedly raised rates to 7.5 per cent to get to grips with rising inflation, and Standard & Poor's cut its credit rating on Russia to BBB-, one notch above junk status. The agency warned that Russia faced a further downgrade if sanctions were tightened.
Despite Russia's decision on Thursday to order large-scale military exercises on its border with Ukraine, Kiev's military operation to flush out armed pro-Russian separatists occupying buildings and checkpoints across the east of the country continued into its second day. Kiev said that Russian troops had moved within a kilometre of its border, but had not crossed over.
It has ordered security forces to blockade the pro-Russian rebel stronghold of Slavyansk. Earlier in the day, a Ukrainian military helicopter at the airport in Kramatorsk, close to Slavyansk, exploded after its fuel tank was hit by sniper fire.
Additional reporting by Jim Pickard in London
Copyright The Financial Times Limited 2014. You may share using our article tools.
Please don't cut articles from FT.com and redistribute by email or post to the web.
Source : http://www.ft.com/cms/s/0/5dd308f0-cc42-11e3-bd33-00144feabdc0.html
