Russia risks political and economic damage over Ukraine, says Merkel

Angela Merkel told the Bundestag: 'The territorial integrity of Ukraine cannot be called into question.' Photograph: Odd Andersen/AFP/Getty Images

Reuters in Berlin-Thursday 13 March 2014German chancellor warns Putin that his actions could lead to 'catastrophe' for Ukraine and harm Russia

Angela Merkel told the Bundestag: 'The territorial integrity of Ukraine cannot be called into question.' Photograph: Odd Andersen/AFP/Getty Images

Angela Merkel has warned Moscow it risks "massive" political and economic damage if it refuses to change course on Ukraine, saying western leaders are united in their readiness to impose sanctions onRussia if necessary.

The German chancellor, using her strongest language since the start of the crisis and removing any suspicion that Germany might seek to avoid a confrontation with the Russian president, Vladimir Putin, said his actions would lead to catastrophe for Ukraine and much more.

"We would not only see it, also as neighbours of Russia, as a threat. And it would not only change the European Union's relationship with Russia," she said in a speech in parliament. "No, this would also cause massive damage to Russia, economically and politically."

Merkel has acknowledged that her efforts to persuade Putin to negotiate via a "contact group" with the transition government in Kiev – which he accuses of ousting the Russian-backed president Viktor Yanukovych unlawfully – have failed and time is running out.

Russian troops have seized control of the Ukrainian region of Crimea on the Black Sea, backing separatists who have taken over the local government and are preparing a referendum on Sunday that could pave the way for annexation by Russia. The US secretary of state, John Kerry, and his Russian counterpart, Sergei Lavrov, are to meet in London on Friday.

Merkel reiterated that if Putin continues to snub diplomacy and lets the referendum in Crimea go ahead, the EU – in close co-ordination with Washington and Nato – would impose tougher sanctions than the largely symbolic measures taken so far.

Travel bans and asset freezes on people and firms accused by Brussels of helping to violate Ukraine's territorial integrity could be approved by EU foreign ministers on Monday.

European leaders, who meet next Thursday, will discuss action affecting trade with Russia if it presses ahead with its current course in Ukraine.

"To be absolutely clear, none of us want it to come to such measures but we are all ready and determined to if they are unavoidable," said Merkel.

Germany receives more than a third of its gas and oil from Russia and more than 6,000 German firms are active there. A poll last week showed that a majority of Germans opposed sanctions against Russia.

Merkel grew up behind the Iron Curtain, speaks Russian and has tried to leverage her influence with Putin, whom she has known for 14 years, in countless phone calls. The former KGB officer, who himself speaks German, is said to respect her as a strong leader.

But Merkel lamented in an unusually emotive speech that the Russian leader was destroying years of post-Soviet rapprochement and was dragging Europe back into "a conflict about spheres of influence and territorial claims that we know from the 19th or 20th century but thought were a thing of the past".

"The territorial integrity of Ukraine cannot be called into question," she told the Bundestag lower house of parliament, making clear that Crimea could not be compared to Kosovo, which seceded from the former Yugoslavia in 2008.