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Obama: Ukraine diplomacy holds hope but sanctions ready

By Mark Felsenthal

WASHINGTON (Reuters) - President Barack Obama said on Thursday that talks between Russia and Western powers aimed at ending tensions in Ukraine have potential but warned that the United States and its allies are prepared to impose more sanctions on Russia if the situation fails to improve.

"I don't think we can be sure of anything at this point," he told reporters at a news conference. "There is the possibility, the prospect, that diplomacy may de-escalate the situation."

However, Obama said he has been in close consultation with European allies and that a new round of sanctions is ready to go if Russia fails to help restore order in the east and south of Ukraine.

"We have put in place additional consequences that we can impose on the Russians if we do not see actual improvement of the situation on the ground," Obama said.

As diplomats convened in Geneva and as tensions continued to simmer in eastern Ukraine, phone lines between the White House and European allies were humming on Thursday.

Obama spoke with German Chancellor Angela Merkel and British Prime Minister David Cameron while Vice President Joe Biden talked to Slovak Prime Minister Robert Fico and Bulgarian President Rosen Plevneliev, who is also commander in chief of the Bulgarian army.

The White House said Obama and Merkel agreed that they would take further measures if Russia fails to act "in short order."

Bulgaria joined NATO 10 years ago and has twice participated in navy drills with a U.S. warship in the Black Sea since the Ukraine crisis began. It is also currently hosting a two-week military exercise that includes Ukrainian and U.S. forces.

Obama's comments to the media came after talks among the United States, Russia, Ukraine and the European Union led to a call for an immediate end to violence in Ukraine, where Western powers believe Russia is fomenting a pro-Russian separatist movement.

Obama told reporters that Western powers would weigh Russia's actions in the coming days before making any decisions about further sanctions.

"My hope is that we actually do see follow-through over the next several days, but I don't think, given past performance, that we can count on that," he said.

"And we have to be prepared that we can actually respond to what continue to be efforts of interference by the Russians in eastern and southern Ukraine," he added.

(Reporting by Mark Felsenthal; Editing by Eric Beech, Bill Trott and Ken Wills)

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