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Obama: More sanctions if Russia disrupts election

Projecting unity on Ukraine, President Barack Obama and German Chancellor Angela Merkel threatened tougher new sanctions against Russia on Friday if Moscow doesn't quickly change its disruptive behavior.

"We will not have a choice but to move forward with additional more-severe sanctions" if Russia disrupts a presidential election in Ukraine scheduled for May 25, Obama said at a news conference with Merkel outside the White House.

"Further sanctions will be unavoidable," Merkel agreed.

Read MoreRussian revenge: Oil firms could face retaliation

Both leaders made it clear that the next step would be to order sanctions on separate parts of the Russian economy or military—on energy or arms for example—but neither leader specified precisely what was being considered.

German President Angela Merkel and U.S President Barack Obama address the media in the Rose Garden at the White House on May 2, 2014 in Washington.
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German President Angela Merkel and U.S President Barack Obama address the media in the Rose Garden at the White House on May 2, 2014 in Washington.

Putin "needs to be dissuaded from his current course," Obama said.

The two leaders met as the European Union announced it would hold talks with Ukraine and Russia later this month on the price of natural gas, an attempt to avoid any disruption in supplies. Moscow recently hiked the price of gas shipped to Ukraine to $485 per thousand cubic meters from $268.50, and threatened to limit deliveries if Kiev does not meet the new price and repay a debt of $3.5 billion.

More forebodingly, pro-Russia forces shot down two Ukrainian helicopters Friday and Ukraine reported many rebels dead and wounded as the interim government in Kiev launched its first major offensive against an insurgency that has seized government buildings across the east.

Obama also said violence escalating in eastern Ukraine is making it obvious to the world that pro-Russia militants there are not peaceful protesters.

Obama voiced support for the Ukrainian government on the day of its first major offensive aimed at driving out the insurgents occupying government buildings across the east. He says Kiev is moving to "restore order."

The Kremlin said Kiev's offensive against the insurgents "destroyed" the two-week-old Geneva agreement on cooling Ukraine's crisis.

In their remarks, Obama and Merkel both said they would prefer the situation in Ukraine to be settled through diplomacy.

Obama said Putin is free to offer his own views with regard to events in Ukraine, but it isn't acceptable for the Kremlin to think "it has veto power" over decisions made by a duly elected government in Kiev.

U.S. major averages bobbed in and out of negative territory as geopolitical worries took center stage, erasing earlier gains following the better-than-expected jobs reports.

Read MoreUN Security Council meet as Ukraine weighs on market

--CNBC.com contributed to this report.

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