Merkel Warns Russia As Obama Rules Out War
German Chancellor Angela Merkel has warned Russia faces economic sanctions after its incursion into Crimea after US President Barack Obama ruled out military action.
Ms Merkel said the European Union (EU) was prepared to step up sanctions and declared the G8 - a group of leading industrial nations - was effectively dead until the crisis was resolved.
Russian President Vladimir Putin had been due to host a G8 meeting in Sochi in June.
Ms Merkel's speech to the German parliament precedes a summit of EU leaders in Brussels on Thursday - but Russia is showing no signs of backing off.
Expanding bank account freezes and travel bans on all those linked to the crisis is on the EU's agenda, and wider trade and financial restrictions are now under consideration.
"The EU summit today and tomorrow will make clear that we are ready at any time to introduce phase-three measures if there is a worsening of the situation," Ms Merkel said.
"As long as there is no political climate for an important format such as the G8, as is the case at the moment, the G8 no longer exists. Neither does the summit nor the format as such."
Europe's dependency on Russian gas will also be discussed by EU leaders.
Arriving at the summit, Prime Minister David Cameron revealed Ukraine would be offered closer links with the EU.
He said: "One of the things we must do at this council is sign a new agreement with Ukraine offering them a prosperous future, access to our markets and real political support."
Despite the increasing threat of economic sanctions, the Kremlin has cranked up its attempt to absorb Crimea into Russia.
Troops have seized military bases on the peninsula and on Thursday Russia's deputy defence minister Yuri Borisov said their military presence in Crimea would be bolstered to protect against "all possible encroachments" and to make it "a worthy representative of the Russian Federation".
This came as Russia's lower house of parliament overwhelmingly approved a treaty to annex Crimea from Ukraine.
There is now just one legal obstacle before Crimea is absorbed by Moscow.
Ukrainian troops in Crimea are currently being redeployed to the mainland by the Kiev government.
Ukrainian navy commander Serhiy Haiduk and several other hostages were detained by Crimean authorities on Wednesday but have now been released.
Russia's actions have been widely condemned by the West but the US president has scotched any notion of a military intervention.
"We are not going to be getting into a military excursion in Ukraine," Mr Obama told San Diego's NBC affiliate KNSD.
"What we are going to do is mobilise all of our diplomatic resources to make sure that we've got a strong international coalition that sends a clear message, which is that Ukraine should decide their own destiny.
"Russia right now is violating international law and the sovereignty of another country. We are going to continue to ratchet up the pressure on Russia as it continues down its current course."
Mr Obama's comments come as United Nations Secretary-General Ban Ki-moon travelled to Russia to meet Mr Putin on Thursday.
As talks started, Mr Ban said he was "deeply concerned" at the current situation.
The UN chief will fly to Kiev for talks with Ukraine's acting president and prime minister on Friday.