THE HAGUE - Russia said on Tuesday its suspension from the G8 was counterproductive as Ukraine pulled more troops out of Crimea, effectively acknowledging defeat following Moscow's annexation of the Black Sea peninsula.
"When it comes to contacts with the G8 countries, we are ready for them, we have an interest in them," Kremlin spokesman Dmitry Peskov told the ITAR-TASS news agency.
"But the unwillingness of other countries to continue dialogue -- we consider it counterproductive, both for us and for our partners themselves," President Vladimir Putin's spokesman said.
Russian troops and Kremlin-backed militias have seized control of almost all Ukrainian bases and ships in Crimea in a push ordered by Putin on March 1 in response to the fall in Kiev of a pro-Kremlin regime.
The crisis has sparked the most explosive East-West confrontation since the Cold War era and sparked fears among the fledgling pro-European leaders in Kiev that Putin now intends to push his troops into the heavily Russified regions of southeast Ukraine.
Western leaders sought to ward off any such threat by forging a more forceful response in The Hague after two rounds of only targeted sanctions that hit only specific officials but left Russia's broader economy untouched.
A summit of the Group of Seven most industrialised countries agreed on Monday to deepen Moscow's isolation over the crisis and meet on their own -- without Russia -- in Brussels instead of gathering in Sochi in June.
They also threatened tougher sanctions over Moscow's annexation of the strategic Black Sea peninsula.
"We're united in imposing a cost on Russia for its actions so far," US President Barack Obama said in reference to the travel bans and asset freezes that Washington imposed on key members of Putin's inner circle last week.
The G7 leaders also issued a joint statement meant to demonstrate the scale of Russia's diplomatic isolation at the height the worst East-West standoff since the Cold War.
"We remain ready to intensify actions including coordinated sectoral sanctions that will have an increasingly significant impact on the Russian economy, if Russia continues to escalate this situation," the G7 leaders' statement said.
The G7 "came together because of shared beliefs and shared responsibilities. Russia's actions in recent weeks are not consistent with them. Under these circumstances, we will not participate in the planned Sochi summit.
But Russian Foreign Minister Sergei Lavrov -- who met with both his US and Ukrainian counterparts in The Hague -- immediately shrugged off the decision as no "great tragedy".
"If our Western partners think that this format (the G8) has outlived itself, then so be it," Russian Foreign Minister Sergei Lavrov told reporters.
"We are not trying to hold on to this format, and we see no great tragedy if it does not meet."
Russia's loss of the right to host the G8 summit is a moral blow to Putin -- a leader whose 14 years in power have focused on resurrecting the Kremlin's post-Soviet pride.
The seat was awarded in 1998 to then president Boris Yeltsin for his decision to turn back on Communism despite the suffering free market reforms brought on tens of millions of Russians who as a result came to despise both democracy and the West.
Lavrov accused the West on Monday of deceiving Moscow for the past two decades by vowing friendship while at the same time expanding the NATO and EU alliances ever closer to Russia's doorstep.
"We trusted our Western partners for a long time. We have an idea of the value of the promises of our Western partners," Lavrov said.
He added that Moscow had no intention of taking over eastern and southern regions of Ukraine.
But the White House and NATO have expressed concern about the sudden buildup of Russian troops along Ukraine's eastern frontier.
Crimea pullout deal
Crimea's effective loss -- though recognised by no major Western power -- has dealt a heavy psychological to many Ukrainians who have already spent the past years mired in economic malaise.
Western powers have been trying to boost the fledgling interim leaders by drumming up urgent assistance that can be issued as soon as the International Monetary Fund puts the finishing touches on a new support programme for the nation of 46 million people.
The European Union on March 5 offered to extend up to $15 billion (11 billion euros) to Ukraine while Washington has pledged $1 billion in loan guarantees.
Japan pitched in another $1.5 billion to the Ukraine rescue fund on Tuesday.
But much of the pessimism in Ukraine stems over the defection of its Crimean soldiers to the side of the local pro-Russian militia.
The regional authorities estimate that about half of Ukraine's troops have kept their weapons but simply switched allegiance.
Ukraine's acting Defence Minister Igor Tenyukh on Tuesday submitted his resignation to parliament over the Crimean debacle.
More than half of those present in the chamber supported the measure. But it still failed to gathered the sufficient votes to pass.
Tenyukh offered to resign moments after assuring parliament that he had struck a deal with Russian commanders in Moscow that would allow Ukraine to "withdraw all its military divisions from the Crimean peninsula completely, with all their arms intact."