G-7 to Keep Next Russia Sanctions on Hold, Urge Dialogue

Group of Seven leaders are poised to spare Russia further sanctions for now, giving the Kremlin another chance to cut off support to the pro-Moscow separatists seeking to break up Ukraine.

The world’s leading industrial democracies will urge Russia to “accelerate” the withdrawal of its troops from Ukraine’s border and warn that “we stand ready to intensify targeted sanctions” in the absence of a peaceful settlement, according to a draft text obtained by Bloomberg News before a two-day G-7 meeting in Brussels.

Russia’s seizure of Crimea and menace to eastern Ukraine led the U.S. and 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 damage western economies as well.

Debate over further penalties is seething in the 28-nation EU, which relies on Russia for 30 percent of its natural gas supply. Germany has faced down business leaders over sanctions and gas customers such as Slovakia have opposed a tougher line, while France has gone ahead with the sale of two Mistral helicopter carriers to the Russian navy.

“We will talk firstly about how we can now support Ukraine after the election of the president, secondly how to continue talks with Russia about the required actions and thirdly make it clear once again that sanctions remain on the table if all of this doesn’t help,” German Chancellor Angela Merkel said as she arrived for today’s summit.

Influencing Separatists

The draft statement faulted Russian President Vladimir Putin for stirring up the insurrection in eastern Ukraine, calling on the Kremlin “to exercise its influence among armed separatists to lay down their weapons and renounce violence.”

The Brussels meeting is the second since the seven -- the U.S., Germany, Japan, U.K., France, Italy and Canada, joined by the EU’s top officials -- disbarred Russia from what had been known as the G-8 since 1998. The draft statement gave no indication when Russia would be invited back in.

“It’s only a suspension; it’s not a permanent exclusion,” EU President Herman Van Rompuy told reporters earlier today. “It will be for the G-7 leaders to agree on when and if Russia has sufficiently changed its course and when and if the environment has returned to a situation where the G-8 can have a meaningful discussion.”

At least three G-7 leaders -- Merkel, French President Francois Hollande and U.K. Prime Minister David Cameron -- will hold one-on-one meetings with Putin this week, with more contact possible when he appears at a D-Day commemoration on Friday in northern France.

“I’m ready for dialogue,” Putin said in an excerpt of an interview with French radio Europe 1 and the TF1 television channel posted on Europe 1’s website today.

Before it's here, it's on the Bloomberg Terminal.