Germany backs more EU sanctions on Russia

“Since our last meeting, not much progress was made: hostages were not released and the Contact Group is not working. Russia has not contributed to peace in Ukraine”, she said.

British PM David Cameron added: “The situation in Ukraine is unacceptable - the territorial integrity of that country is not being properly respected by Russia and we need to send a very clear message with clear action at this Council meeting tonight”.

According to draft EU summit conclusions, leaders aim to block funding for any new Russia projects in two international banks - the EIB and EBRD.

They aim to suspend European Commission grants for Russia, excluding support for NGOs. They also aim to call on private sector banks not to lend to firms in Crimea, which Russia annexed in March, and to make legal preparations to blacklist Russian companies in the future.

The measures are to come one week after the EU blacklisted 11 pro-Russia rebels.

Estonian PM Taavi Roivas noted: “Changing a country’s borders by force is not acceptable in today’s Europe, and the European Union cannot be a bystander”.

Finnish PM Alexander Stubb said the Ukraine measures will be adopted before leaders get down to talks on EU top jobs.

But the decisions, if they go head, will fall short of so-called “stage three” EU sanctions designed to hurt whole sectors of the Russian economy.

Lithuanian President Dalia Grybauskaite said that unless the EU takes a tougher line “Russia will go on behaving aggressively on the borders of Europe”.

She said she would like to see an EU embargo on Russia’s military and high-technology sectors. But she added: “We’re still very far away from it today”.

Sweden’s PM Fredrik Reinfeld also said the EU needs to impose stage three measures “to push back” against Russia. But when asked if such a step is possible at this stage, he replied: “I don’t think so”.

EU leaders on 27 June said Russia must meet four conditions in order to mend relations.

The list included: release of all hostages by pro-Russia rebels; handing back border checkpoints to Ukraine; launching peace talks; installing international ceasefire monitors.

None of them have been met.

Instead, the US and Ukraine, which are also keen for the EU to take a tougher approach, reported that Russia is pouring heavy weapons into east Ukraine and recruiting volunteers to fight Ukrainian soldiers.

Their views are shared in many eastern and Nordic EU capitals. But their lobbying tactics have caused annoyance.

“Some third countries are behaving like the 29th or 30th [EU] member state, or the fourth EU institution”, an EU source told press in Brussels on Wednesday.