G-7 attempts diplomacy with Putin

The U.S. and its allies embarked on two days of contacts with Russian leaders in a bid to resolve the crisis in Ukraine, giving the Kremlin another chance to cut support to pro-Moscow rebels seeking to break up the country.

U.K. Prime Minister David Cameron will meet Vladimir Putin in Paris this evening, before the Russian president has dinner with French President Francois Hollande. U.S. Secretary of State John Kerry also holds talks with Russian Foreign Minister Sergei Lavrov in Paris today.

The discussions, as the Russians join events in northern France to mark the 70th anniversary of the D-Day allied landings during World War II, come after Group of Seven leaders last night spared Russia more sanctions over Ukraine, while urging it to complete the pullback of its troops from the country’s border. Ukraine’s newly elected president, Petro Poroshenko, will be sworn in June 7, and the authorities in Kiev say they’re making headway in their armed operation against the separatists.

“The G-7 nations are ready to impose additional costs on Russia” if needed, President Barack Obama told reporters after talks with Cameron in Brussels. Russia must recognize Poroshenko as the legitimate leader of Ukraine, Obama said.

“The next month will be crucial” in judging if Putin takes steps to stop support for separatist groups, Cameron said.

Russia’s benchmark Micex stock index fell 0.2% at 6 p.m. in Moscow, following three days of gains.

‘Targeted Sanctions’

The G-7 leaders warned Russia that “we stand ready to intensify targeted sanctions and to implement significant additional restrictive measures” in the absence of a peaceful settlement, according to a statement issued late yesterday.

Russia’s seizure of Crimea and menace to eastern Ukraine led the U.S. and the European Union to impose asset freezes and travel bans on 98 people and 20 companies, while stopping short of broader curbs on investment and trade that might also damage their economies.

“With our good balance of diplomatic efforts but also the repeated threat of sanctions we managed to achieve quite a bit for Ukraine, though not enough,” German Chancellor Angela Merkel told reporters after a working dinner. “We want to pursue this path and not any other.”

The German chancellor is due to hold talks with Putin tomorrow.

Gas Reliance

Debate over further penalties is seething in the 28-nation E.U., which relies on Russia for 30% of its natural gas. Germany’s government has faced down business leaders who objected to sanctions, while gas customers such as Slovakia have opposed a tougher line. Hollande reaffirmed plans to go ahead with the sale of two Mistral helicopter carriers to the Russian navy.

G-7 leaders warned Russia against using energy to force compliance with its political goals, according to a draft of the conclusions from the summit. Russia has set a deadline of June 10 for Ukraine to start paying for gas in advance.

“The use of energy supplies as a means of political coercion or as a threat to security is unacceptable,” the draft statement obtained by Bloomberg News reads. “The crisis in Ukraine makes plain that energy security must be at the center of our collective agenda.”

In Ukraine, the authorities said their operation against the separatists in the mainly Russian-speaking Donetsk and Luhansk regions was continuing to make progress.

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