Heads of the G7 leading industrial nations, chaired by David Cameron, on Wednesday called on Vladimir Putin to engage with Ukraine's incoming President Petro Poroshenko, but stopped short of triggering fresh sanctions against Russia at a curtailed two-day summit in Brussels. The group is keeping its options open, saying it is willing to escalate sanctions if Russia fails to engage in a peaceful resolution of the crisis.

The G7 leaders – many of whom are due to see the Russian president individually later this week about the D-day commemorations in Normandy – are likely to impress on Putin to meet Poroshenko to open a dialogue on the kind of federal structure Ukraine might develop, as well as future trade relations.

Cameron's spokeswoman said: "The Ukrainian elections last week had given a clear mandate, and we will work with the new Ukrainian president." She added there was no sign yet that Russia was using its influence to rein in the Russian-backed separatists in eastern Ukraine.

Russia sought an emergency meeting of the UN security council this week to call for a ceasefire in eastern Ukraine and the introduction of humanitarian corridors for refugees from Ukraine into Russia.

The G7 statement described the Russian annexation of Crimea as illegal, stating: "We are united in condemning the Russian Federation's continuing violation of the sovereignty and territorial integrity of Ukraine". It also condemned "the use of energy supplies as a means of political coercion" and called for energy security and the diversification of supplies to be "at the centre of our collective agenda".

Putin had been due to chair a full meeting of the G8 in Russia, but the remaining seven nations pulled out in protest at the annexation of Crimea. It is the first time Russia has been excluded from the forum in 17 years.

Putin will meet Cameron on Friday, as well as the German chancellor Angela Merkel, for meetings on the margins of the Normandy D-day commemorations. He will also meet President François Hollande in Paris the night before the celebrations, suggesting Putin is hardly being excluded from discussions with western leaders.

France has been under pressure, mainly from the Poles, to cancel plans to sell Mistral helicopter carriers to Russia. Cameron will also hold a one-hour meeting with Obama in Brussels on Thursday, at which they will discuss how Cameron should approach his meeting with Putin, as well as Afghanistan.

Russia has tried to brush aside the significance of the boycott, describing the G7 as an informal club, but Russia had fought hard to gain entry to the forum and now faces the possibility of long term exclusion. In the absence of Russia, Cameron will informally chair discussions on Ukraine on Wednesday night and Merkel will lead the discussions on Thursday.

The G7 discussions will focus not just on Ukraine, but also on Syria, the global economy, trade and climate change, including European independence from Russian gas supplies. The group will again claim that here is no future for Syria with President Assad in charge, as well as rejecting the legitimacy of the elections underway in Syria.

In a sign of some de-escalation over the Ukrainian crisis, Russia removed 40,000 troops from the Ukrainian border, but there has been no indication it is pulling back the support it is giving to Russian-led disruption in eastern Ukraine.

It is likely Cameron will use some of his time in Brussels to reiterate his opposition to Jean-Claude Juncker becoming the next European Commission President. He yesterday rang Herman Van Rompuy, the President of the European Council, to reiterate his opposition to Juncker, a positionstance that puts him at odds with Merkel, an ally he badly needs in years to come.