THE HAGUE, March 25 - Russia and the West drew a tentative line under the Ukraine crisis on Tuesday after U.S. President Barack Obama and his allies agreed to hold off on more damaging economic sanctions unless Moscow goes beyond the seizure of Crimea.

Describing Russia as a "regional power" and not the biggest national security threat to the United States, Obama said Russian forces would not be removed militarily from Crimea, but the annexation of the Black Sea region was not a "done deal" because the international community would not recognize it.

"It is up to Russia to act responsibly and show itself once again to be willing to abide by international norms and ... if it fails to do so, there will be some costs," he told a news conference at the end of a nuclear security summit in The Hague, Reuters reported.

After scoffing at a decision by Obama and his Western allies to boycott a planned Group of Eight summit in Sochi in June and hold a G7 summit without Russia instead, the Kremlin said it was keen to maintain contact with G8 partners.

"The Russian side continues to be ready to have such contacts at all levels, including the top level. We are interested in such contacts," President Vladimir Putin's spokesman, Dmitry Peskov, told Interfax news agency.

Obama said he was concerned at the possibility of further Russian "encroachment" into Ukraine and believed Putin was still "making a series of calculations". He insisted Russian speakers faced no threat in the country, contrary to Moscow's assertions.

He urged Putin to let Ukrainians choose their own destiny free from intimidation, saying he was sure they would opt for good relations with both the European Union and Moscow rather than making a zero-sum choice for one against the other.

"Russia is a regional power that is threatening some of its immediate neighbors, not out of strength but out of weakness," Obama said. "We (the United States) have considerable influence on our neighbors. We generally don't need to invade them in order to have a strong cooperative relationship with them."

Asked what was to stop a further Russian "land grab", the U.S. president drew a distinction between an attack on members of NATO, covered by its Article V mutual defense clause, and on non-members where the West could apply international pressure, shine a spotlight on those states and provide economic support.

Moscow made two conciliatory gestures on Monday after its deputy economy minister said up to $70 billion in capital may have fled his country in the first quarter of the year.

Foreign Minister Sergei Lavrov met his Ukrainian counterpart, Andriy Deshchytsia, for the first time, even though Russia does not recognize the Kiev government.

Moscow also allowed monitors from the pan-European security watchdog OSCE to begin work in Ukraine after prolonged wrangling over their mandate, which Russia says excludes Crimea.

The Ukrainian Foreign Ministry said Deshchytsia protested at the annexation of Crimea. Lavrov said Russia did not intend to use force in eastern and southern regions of Ukraine, and "the two sides agreed not to fuel further escalation in the Crimea problem that could cause casualties,” it said. (rt/ez)