The US and Europe have significantly strengthened sanctions on Moscow over Ukraine, with Washington for the first time directly targeting Russia's banking, military and energy sectors.
The new blows against Russia deepened the most serious stand-off between Moscow and the West since the end of the Cold War, as fighting between the Kiev government and pro-Russian separatists threatened to escalate into all-out civil war.
Nearly 50 civilians have been killed in artillery and air strikes across the Russian-speaking eastern Ukrainian regions of Donetsk and Lugansk since the weekend that both sides blame on each other.
Kiev reported the deaths of 11 more servicemen overnight and warned that Russia had deployed thousands of troops along its entire border with Ukraine in preparation for a possible invasion.
The US said it had no option but to act after Russia refused to take steps to halt both its support for separatists and the cross-border flow of weapons and materiel.
"We have moved to impose additional sanctions on Russia for its actions in violation of Ukraine's sovereignty and territorial integrity," said a senior US official on condition of anonymity.
The US measures, Washington's most punitive move against Russia so far in the Ukraine crisis, struck directly at key sectors of the economy.
They included moves against two major Russian financial institutions, Gazprombank and VEB, and two giant Russian energy firms, OA Novatek and Rosneft, which will limit access to US capital markets.
The US Treasury also said eight Russian arms firms that produce small armaments, mortar shells and tanks would also face direct sanctions.
The US list of sanctions also included measures against the self-styled breakaway Donetsk People's Republic and the Lugansk People's Republic in eastern Ukraine.
The US acted as European leaders strengthened their own sanctions against Moscow, though the EU measures appeared to be less robust than those unveiled by Washington.
A diplomatic source in Brussels told AFP that the European Union would suspend new investments in Russia by the European Investment Bank (EIB) and the European Bank of Reconstruction and Development (EBRD).
"The situation in Ukraine is unacceptable," said British Prime Minister David Cameron, arriving for summit talks in Brussels - before the new measures were announced.
"We need to send a very clear message with clear actions," he added.
Europe's measures come amid significant opposition to deeper punishments for Moscow in the European business community.
US officials, however, said that they believed the combined action by the transatlantic allies would impose a significant price on the Russian economy.
One official said that he could not rule out the possibility of the new sanctions tipping the Russian economy into a recession.
Russia on Thursday called the new US sanctions outrageous and unacceptable, and threatened retaliation.
"The US administration's new decision to enforce sanctions against a number of Russian legal entities and individuals under a far-fetched, false pretext cannot be called anything other than outrageous and fully unacceptable," deputy foreign minister Sergei Ryabkov told the Interfax news agency.
He added that Russia would retaliate without providing details.
"We condemn those politicians and officials who are behind such actions and confirm our intention to adopt measures which will be perceived in Washington rather painfully and acutely," Ryabkov said.
"We are not after an immediate effect, we are not going to copy the methods of the US administration that provoke rejection, we will not yield to provocation and act in a calm manner," he added.
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