Obama says talks offer hope diplomacy can work in Ukraine

WASHINGTON (Reuters) - President Barack Obama said on Thursday talks between Russia and western powers aimed at ending tensions in Ukraine are promising but that the United States and its allies are prepared to impose sanctions on Russia if the situation fails to improve. "There is the possibility, the prospect, that diplomacy may de-escalate the situation," he told reporters at the White House. "The question now becomes will in fact they use the influence they've exerted in a disruptive way to restore some order so that Ukrainians can carry out an election and move forward with the decentralization reforms that they've proposed," he said. (Reporting by Mark Felsenthal; Editing by Eric Beech)