Crimea crisis leads to further sanctions on Putin's inner circle

European Union leaders agreed on Thursday to expand the bloc's list of people targeted with sanctions over events in Ukraine by 12 names. They also warned that further economic measures against Russia could be taken if the situation in Ukraine worsens.

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The announcement brings the total number of individuals targeted by EU sanctions to 33, many of whom are considered to be within Russian President Vladimir Putin's inner circle of advisers.

German President AngelaMerkelsaid the EU was ready to support Ukraine's new government financially, provided it reached a deal with the International Monetary Fund. She said talks had made substantial progress and a deal was expected soon.

Merkeltold a news conference after the first day of a summit in Brussels that the EU was prepared to send an observer mission to Ukraine but would prefer the pan-European security watchdogOSCEto send monitors if Russia will agree on a mandate.

Russia was the lone dissenter among 57 nations who voted on a resolution to sendOSCEobservers to southern and eastern Ukraine at a meeting in Vienna on Wednesday.

EU follows U.S. move toward harsher sanctions

U.S. President Barack Obama also expanded economic sanctions on Thursday as Russia all but cemented its plans to annex Crimea.

The U.S. sanctions target 20 individuals inside and outside the government, as well as BankRossiya, a private bank owned by YuriKovalchuk,who is considered to be Russian President Vladimir Putin's banker.

Obama said the sanctions are serious enough that he expects they will have a significant impact on the Russian economy and could disrupt the global economy as well.

Obama also called on Russia to scale back its military presence on the Ukrainian border and to respect Ukraine's new interim government.

The Ukrainians shouldnt have to choose between the West and Russia, Obama said at a news conference on the White House lawn.We want the Ukrainian people to determine their own destiny.

The new measures come days after an initial wave of sanctions that the U.S. government said were the most comprehensive since the Cold War.

Russia immediately fired back by imposing entry bans on American lawmakers and senior White House officials, including Senate Majority Leader Harry Reid, House Speaker JohnBoehnerand Obama's senior adviser DanPfeiffer.

Russia also faces further sanctions from the EU, which is set to meet in Brussels later Thursday.

In an address to the German Parliament in Berlin, Chancellor AngelaMerkelsaid the EU was readying further sanctions and that theG8forum of leading economies had been suspended indefinitely. Russia holds the presidency of theG8and President Vladimir Putin was due to host his counterparts, including President Barack Obama, at a summit inSochiin June.

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"So long as there aren't the political circumstances, like now, for an important format like theG8, then there is noG8,"Merkelsaid.

Earlier this week, the EU and the United States slapped sanctions on certain individuals that were involved in what they say was the unlawful referendum in Crimea over joining Russia. Moscow formally annexed Crimea earlier this week in the wake of the poll. The Black Sea peninsula had been part of Russia for centuries until 1954 when Soviet leader Nikita Khrushchev transferred it to Ukraine.

Level 2 sanctions

The crisis erupted late last year after Yanukovych backed out of an association deal with the EU in favour of a promised $15 billion bailout from Russia. That angered Ukrainians from pro-European central and western regions.

Merkel said EU leaders would increase those "level 2" sanctions against Russia when they meet later Thursday in Brussels to widen the list of those whose assets are being frozen and who are bannedfrom travelling.

She also reiterated that if things worsen, the EU is prepared to move to "level 3" measures, which would include economic sanctions.

"The European Council will make it clear today and tomorrow that with a further deterioration of the situation we are always prepared to take level 3 measures, and those will without a doubt include economic sanctions," she said.

If Russia was listening to Merkel, it paid no heed on Thursday.The Russian parliament's lower house endorsed the country's annexation of Crimea.The merger now only needs to be rubber-stamped by the upper house and signed by Russian President Vladimir Putin, formalities expected to be completed by the end of the week.

Moscow responds toexpanded sanctions

Putin's spokesman said on Thursday it was "unacceptable" for the U.S. to impose sanctions on Russians and warned Moscow would respond in kind to U.S. measures meant to punish Putin's allies.

Spokesman Dmitry Peskov said the Kremlin was studying thelist of 20 more Russians hit with U.S. visa bans and asset freezes.

"The appearance of some of the names on the list causes nothing but extreme perplexity," Peskov said. "But no matter what the names are, the practice of (issuing sanctions) lists is unacceptable for us.

"In any case, Russia's reaction to these lists will be based on the principle of reciprocity and will not be long in coming."

Ukraine fears Russian invasion

YuriiKlymenko,Ukraines ambassador to the UN, warned Thursday Russia may invade again.

"There are indications that Russia is on its way to unleash a full blown military intervention in Ukraine's east and south,"Klymenkosaidat a UN briefing on the human rights situation in Ukraine.

His statement was widely supported by other ambassadors, but denied by a Russian diplomat, who read a prepared statement justifying Russia's actions in Crimea.

The tensions have forced international leaders to string together a series of emergency meetings.

UN Secretary-General Ban Ki-moonmet with Russian President Vladimir Putin in Moscow on Thursday, a meeting that Ban told reporters afterwards was "very productive and constructive."

Ban also pointed out that Putinhas repeatedly called for international disputes to be solved within the framework of the UN Charter.

"I have emphasized that all parties refrain from any hasty or provocative actions that could further exacerbate an already very tense and very volatile situation. Inflammatory rhetoric can lead to further tensions and possible miscalculations, as well as dangerous counter-reactions," said Ban.

He is set to travel to Kyiv tomorrow to hold talks with the new interim government there.

No intentions to drive deeper into Ukraine

Tens of thousands of Russian soldiers continue to mass near the Ukrainian border. Russian officials say they are there for training exercises.

Russian border guards also stepped up checks on goods entering the country from Ukraine, officials from the customs services and an agricultural inspection service said.

"Russian customs have increased customs checks, acting on information about possible attempts to bring contraband in from Ukraine," said spokesman Dmitry Kotikov.

Russia also announced Thursday that it would build up its defences in Crimea.

Russias Deputy Defence Minister Yuri Borisov told state media Russia additional troops will protect against all possible encroachments.

But during a phone conversation on Thursday, U.S. Defense Secretary Chuck Hagel received assurances from his Russian counterpart, Sergei Shoigu, that Russian troops along Ukraine's eastern border had no plans to enter the country, a Pentagon spokesman said.

Rear Admiral John Kirby said Hagel spoke to Shoigu for nearly an hour by telephone and was "clear and firm" in telling him that with Russian forces in control in Crimea, they were responsible for any incidents there.

During the call, Hagel asked for an explanation of why Russia was deploying forces along Ukraine's eastern and southern borders and was assured by Shoigu they were conducting exercises and had no intention of crossing the border, the spokesman said.