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West, Russia signal line drawn on Ukraine

Obama is concerned at the possibility of further Russian encroachment into Ukraine.

FILE: A portrait of Russian President Vladimir Putin with the word “Crimea” written above his lip, in reference to Hitler's mustache, as she demonstrates against Russian intervention in Ukraine. Picture: AFP.

THE HAGUE/MOSCOW - Russia and the West drew a tentative line under the Ukraine crisis on Tuesday after US President Barack Obama and his allies agreed to hold off on more damaging economic sanctions unless Moscow goes beyond the seizure of Crimea.

Describing Russia as a "regional power" and not the biggest national security threat to the United States, Obama said Russian forces would not be removed militarily from Crimea, but the annexation of the Black Sea region was not a "done deal" because the international community would not recognise it.

"It is up to Russia to act responsibly and show itself once again to be willing to abide by international norms and ... if it fails to do so, there will be some costs," he told a news conference at the end of a nuclear security summit in The Hague.

After scoffing at a decision by Obama and his Western allies to boycott a planned Group of Eight summit in Sochi in June and hold a G7 summit without Russia instead, the Kremlin said it was keen to maintain contact with G8 partners.

Obama said he was concerned at the possibility of further Russian "encroachment" into Ukraine and believed Putin was still "making a series of calculations". He insisted Russian speakers faced no threat in the country, contrary to Moscow's assertions.

He urged Putin to let Ukrainians choose their own destiny free from intimidation, saying he was sure they would opt for good relations with both the European Union and Moscow rather than making a zero-sum choice for one against the other.

Asked what was to stop a further Russian "land grab", the US president drew a distinction between an attack on members of NATO, covered by its Article V mutual defence clause, and on non-members where the West could apply international pressure, shine a spotlight on those states and provide economic support.

A senior administration official told reporters travelling with Obama on Air Force One to Brussels that "there's no question that NATO is prepared to defend any ally against any aggression."

The official said that in Obama's talks on Wednesday with NATO's secretary general, "we'll be discussing very specifically what more can be done in terms of signalling concrete reassurance to our Eastern European allies."

Dutch Prime Minister Mark Rutte said the United States and European Union allies were aligned in their response, contrary to media reports that Washington was pushing reluctant Europeans fearful for their economic interests to get tougher.

CONCILIATORY GESTURES

Moscow made two conciliatory gestures on Monday after its deputy economy minister said 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, even though Russia does not recognise the Kiev government.

Moscow also allowed monitors from the pan-European security watchdog OSCE to begin work in Ukraine after prolonged wrangling over their mandate, which Russia says excludes Crimea.

Ukraine ordered its remaining forces in Crimea to withdraw for their own safety on Monday after Russian forces fired warning shots and used stun grenades when they stormed a marine base and a landing ship. There were no casualties.

That order came too late to save the job of interim Defence Minister Ihor Tenyukh, sacked by parliament on Tuesday over his handling of the crisis, after it emerged that fewer than a quarter of soldiers in Crimea plan to stay in the military.

Lawmakers elected Mykhailo Koval, head of the Ukrainian border guard, to replace Tenyukh.

In the Perevalnoye base, 25 km southeast of the capital, Simferopol, sombre-looking Ukrainian troops loaded a freight truck with furniture, clothes and kitchen appliances.

But in the Belbek air base stormed four days ago, officers and soldiers refused to leave until the Russian military releases their commander, Colonel Yuliy Mamchur, who became a symbol of Ukrainian resistance in Crimea.

According to his aides, Mamchur is being held in the Russian Black Sea Fleet's home port of Sevastopol.

IMF DEAL SOUGHT

Ukrainian Finance Minister Oleksander Shlapak said he was negotiating with the International Monetary Fund for a loan package of $15 billion to $20 billion because the economy had been severely weakened by months of political turmoil and mismanagement. He forecast a 3 percent contraction in the economy this year.

Obama also urged the IMF to reach agreement swiftly on a financial support package for Kiev, which would unlock additional aid from the European Union and Washington.

Increasing the chances a Ukraine aid bill will get through the US Congress, Senate Democrats agreed on Tuesday to drop language in their measure containing reforms to the IMF. There had been stiff opposition to the IMF measures in the Republican-led House of Representatives.

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 ruling politburo member before the collapse of the Soviet Union in 1991, expressed understanding for Russia's position in a telephone call with Putin on 10 March.

Lavrov 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 ..."

European diplomats said tentative signs that Putin may have decided to go no farther than Crimea in his campaign to protect ethnic Russians in former Soviet republics may reflect concern about the mounting economic consequences.

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.