Detained observers 'NATO spies'

German Foreign Minister Frank-Walter Steinmeier had discussed the tense situation concerning the group of observers with Russian counterpart Sergei Lavrov on Saturday, according to the German foreign ministry.

Steinmeier stressed that Moscow must use its influence to secure the group's "immediate release," according to the foreign ministry statement.

The pro-Russian rebels had accused them of being "NATO spies" and vowed to continue holding them. In a statement on Saturday, Denis Pushilin, the head of the insurgents' self-declared Donetsk Republic, confirmed that they had been detained.

"[The] NATO spies...will be exchanged for our own prisoners. I don't see any other way they will be freed," Pushilin said.

The self-proclaimed Mayor of Slovyansk, Vyacheslav Ponomaryov also told Russian television news crews that the OSCE members were considered "intelligence officers of NATO country members."

"Military personnel from Denmark, Germany, Poland, the Czech Republic, Bulgaria I think and - from somewhere else, I can't immediately recall - have been detained," he said in broadcasts seen in Moscow.

The eastern town of Slovyansk has been at the center of tensions between pro-Russian activists and the authorities with rebels seizing several other towns.

The West calls for safe release of detainees

Late Friday, German Defense Minister Ursula von der Leyen confirmed that pro-Russian separatists had arrested 13 mission members, including the observers, their interpreter and driver.

"It is critical that we use all diplomatic channels to free this team immediately and unhurt," she said.

Meanwhile, Russian news agencies reported Russia's envoy to the OSCE said Moscow would take all steps to free the observers.

Four of the team are believed to be German, including three members of the German military.

Swedish Foreign Minister Carl Bildt posted on Twitter that one of the OSCE members was a Swede.

The observers were stopped at a rebel-held checkpoint as they were entering Slovyansk on Friday and were taken to the SBU building, according to the Ukrainian interior ministry.

The detainees appear to be part of a separate, unarmed military verification mission under German command. The Organization for Security and Cooperation in Europe told the AFP news agency that all of the observers in its main mission on the ground in Ukraine were accounted for.

Moscow to face more sanctions

Meanwhile, leaders of the Group of Seven (G7) major economies agreed to impose extra sanctions on Russia over its intervention in Ukraine.

The US said they are part of new punitive measures, which could be unveiled as early as Monday unless Russia moved fast to defuse the Ukraine crisis.

Meeting in South Korea, the G7 leaders said Russia had failed to take any concrete steps to implement an accord, signed in Geneva, to de-escalate the situation.

"Instead, it has continued to escalate tensions by increasingly concerning rhetoric and ongoing threatening military maneuvers on Ukraine's border," the G7 leaders said in a statement following talks in Seoul.

"We underscore that the door remains open to a diplomatic resolution of this crisis," it added.

Putin acknowledged for the first time this week that the sanctions were causing difficulties for Russia, however, he said the impact was not "critical."

Russian banks had been moving funds out of foreign accounts in anticipation of sanctions.

Energy threat the next step?

Increasing the pressure on Moscow could carry risks for the West, especially Europe, as it depends on Russia for about a quarter of its gas supplies.

Russia had threatened to cut off supplies to Ukraine, which would have a knock-on effect further west because many pipelines go through Ukrainian territory.

Officials from the EU and Ukraine met in Kyiv on Saturday to discuss technical ways to minimize the impact if gas supplies are cut off.

lw/kms (AP, AFP, Reuters)