In a statement, the British prime minister, David Cameron, the US president, Barack Obama, the French prime minister, François Hollande, the German chancellor, Angela Merkel, and counterparts from Italy, Japan, and Canada expressed “deep concern at the continued efforts by separatists backed by Russia to destabilise eastern Ukraine”.
They praised the “restraint” of the government in Kiev and the efforts it had made to implement the agreement struck in Geneva earlier this month.
In contrast, Moscow had taken “no concrete actions in support of the Geneva accord” and had not condemned pro-Russia militants or urged them to leave buildings they have been occupying”.
The new sanctions will target individuals or companies with influence in specific sectors of the Russian economy such as energy and banking. Washington is expected to announce its sanctions list as early as Monday and the European Union will announce sanctions separately.
The announcement of new sanctions follows the capture of European military observers in Slavyansk on Friday night, by pro-Russian separatists.
The group was operating under the mandate of the Organisation for Security and Co-operation in Europe (OSCE) and comprised four Germans, a Pole, a Dane, a Swede and a Czech officer. According to the Ukrainian interior ministry, they were being escorted by five members of the Ukrainian armed forces when their bus was seized by separatists.
The ministry said it believed they were being held in the state security service (SBU) building in Slavyansk, which is being occupied by separatists led by a militant leader, Vyacheslav Ponomarev, who has declared himself the city’s mayor.
Ponomarev told journalists: “It was reported to me that among them was an employee of the Kiev secret military staff … People who come here as observers for the European community bringing with them a real spy – that is inappropriate.”
The G7 sanctions decision came after a conference call between Obama, Cameron, Hollande, Merkel and the Italian prime minister, Matteo Renzi.
“The leaders also agreed that Russia had not reciprocated – including by not publicly supporting the Geneva accord, nor calling on armed militant groups to lay down their arms and leave the government buildings they’ve occupied – and had in fact continued to escalate the situation through its increasingly concerning rhetoric and threatening military exercises on Ukraine’s border,” a White House statement said.
“The president noted that the United States is prepared to impose targeted sanctions to respond to Russia’s latest actions.”
Downing Street said the leaders had condemned “the absence of any efforts on the part of Russia to support the implementation of the Geneva agreement, and the further efforts to destabilise Ukraine”.
The detained European observers were working for a small German-led military monitoring mission invited into the country by the Kiev government under an OSCE mandate. They report back directly to their national capitals, rather than to OSCE headquarters in Vienna.
Russia’s envoy to the OSCE said that Russia will do everything to free the monitors. Andre Kelin said: “We think that these people need to be freed as soon as possible. Russia as a member of the OSCE will undertake all possible steps in this matter.”
Vyacheslav Ponomaryev, self-proclaimed mayor of the eastern city of Slovyansk said the observers who he said were NATO spies could be released in exchange for jailed pro-Russian activists. “They are officers from NATO member states. As we found maps on them containing information about the location of our checkpoints, we get the impression that they are officers carrying out a certain spying mission,” he said.
Simon Ostrovsky, an American journalist from Vice News who was detained for four days in the same building as the monitors, gave a grim account of conditions.
“On Monday night I was pulled out of a car at a checkpoint, then blindfolded, beaten, and tied up with tape. After spending hours alone on the floor of a damp cell with my hands tied behind my back and a hat pulled over my eyes, I was led into a room where I was accused of working for the CIA, FBI and Right Sector, the Ukrainian ultranationalist group,” he wrote.
“When I refused to give the password to my laptop, I was smacked in the arm with a truncheon. When I was asleep on the floor, masked men came to wake me up and tell me how no one would miss me if I died, and then kicked me in the ribs as they left.”
He said he saw a dozen other detainees in the cellar, including Artyom Deyneha, a local computer programmer, Serhiy Lefter, a freelance journalist, and Vadim Sukhonos, a deputy in the city council.
Ukraine announced it was launching the second phase of its “anti-terrorist operation” in the east of the country, designed to squeeze out separatist rebels from Slavyansk. The interior minister, Arsen Avakov, denied claims he had suspended the operation on Thursday because of the growing threat of Russian invasion.
A column of Ukrainian armoured vehicles flattened several checkpoints on the outskirts of the town, only to retreat. Avakov said on Facebook his troops had shown restraint in order to minimise risks to the “peaceful population”.
Ukrainian officials said the latest operation was designed to encircle Slavyansk, the de facto rebel capital, controlled by heavily-armed pro-Russian gunmen. They said the “terrorists” inside the town – with a population of 120,000 – had hidden themselves in kindergartens and hospitals. Ukrainian forces would not try to weed them out because of the obvious risk of civilian casualties, they said.
There were few signs, however, that this blockade was real. Ukrainian forces maintained a checkpoint, set up on Thursday, some six miles east of the town, along a forest road. Several buses carrying troops arrived to the north. But there was no Ukrainian army presence on the main route between Donetsk, the regional capital, and Slavyansk. The separatists remained dug in at a key southern entrance over a bridge, as well as other entry points.