German Chancellor Angela Merkel has said Russia will face escalating EU sanctions if it does not take steps to ease the crisis over Crimea.
Mrs Merkel, speaking ahead of an EU summit in Brussels, said the current political situation also meant the G8 effectively no longer exists.
Tensions remain high in Crimea after its leaders signed a deal with Moscow to split from Ukraine and join Russia.
Pro-Russian forces took over at least two military bases there on Wednesday.
Ukraine's navy commander, Serhiy Hayduk was detained, but has now been released.
Over dinner Europe's leaders will discuss their next moves. A few more Russian names may be added to the sanctions hat. That is the easy part. The names are already drawn up.
The question is whether, this time, they will go after people closer to President Putin. That is less certain.
Crimean leaders signed a treaty with Moscow on Tuesday to absorb the peninsula - an autonomous republic in southern Ukraine - into Russia, following a referendum which the West and Kiev say was illegal.
Russia's lower house will vote on ratifying the Crimea treaty on Thursday, and the upper house on Friday. The measure is expected to sail through.
In a resolution on Thursday, Ukraine's parliament said the country would "never and under no circumstances end the fight to free Crimea of occupants, no matter how difficult and long it is".
'Political consequences'Western leaders have denounced Russia's actions in Crimea as a violation of Ukraine's sovereignty and a breach of international law.
Crimean dispute
Russia's argument:
- Crimea has always been part of Russia and was unfairly given to Ukraine in 1954
- Russia has a duty to protect ethnic Russians wherever they are
- Crimeans voted overwhelmingly in a legally sound referendum to join Russia
West's argument:
- Ukraine's pro-Moscow government was legitimately ousted by the uprising
- The referendum was carried out by a Moscow-installed leadership and under military occupation
- Russia is breaking international law and threatening regional stability
The EU has already imposed sanctions on 21 people connected to Moscow's intervention in Crimea, and is expected to discuss expanding the sanctions when it meets on Thursday to include political and military figures close to Russian President Vladimir Putin.
Speaking in Berlin, Mrs Merkel said the EU would "make clear that we are ready at any time" to increase sanctions against Russia "if there is a worsening of the situation".
The EU would also, she said, "draw consequences for the political relations between the EU and Russia, as well as for relations between the G7 and Russia".
The G8 - comprising seven of the world's leading industrialised nations, and Russia - is scheduled to hold a summit in the southern Russian city of Sochi in June.
But Mrs Merkel said it was "obvious, as long as the political context for such an important format like the G8 does not apply, as is the case at the moment, the G8 doesn't exist anymore, neither does the summit nor the format as such".
The BBC's Stephen Evans in Berlin says the chancellor did not say what the sanctions would be, and it is unclear whether Germany expects Russia to undo the integration of Crimea into Russia in order to avoid tough economic measures.
Germany has substantial trade with Russia, he adds, and opinion polls indicate a widespread lack of support for economic sanctions.
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What does the future look like for Crimea's economy? Tanya Beckett reports
The US has also ordered a freeze of assets and travel bans on 11 individuals, and has said it is considering expanding these.
But President Barack Obama ruled out US military involvement in Ukraine on Wednesday, saying: "We do not need to trigger an actual war with Russia."
UN Secretary General Ban Ki-moon will meet President Putin in Moscow on Thursday before travelling to Kiev on Friday.
He has called for a solution to the crisis guided by the principles of the UN Charter including sovereignty, territorial integrity and the unity of Ukraine.
Crisis timeline
- 21 Nov 2013: President Viktor Yanukovych abandons an EU deal
- Dec: Pro-EU protesters occupy Kiev city hall and Independence Square
- 20-21 Feb 2014: At least 88 people killed in Kiev clashes
- 22 Feb: Mr Yanukovych flees; parliament removes him and calls election
- 27-28 Feb: Pro-Russian gunmen seize key buildings in Crimea. Parliament, under siege, appoints pro-Moscow Sergei Aksyonov a PM
- 6 Mar: Crimea's parliament votes to join Russia
- 16 Mar: Crimea voters choose to secede in disputed referendum
- 17 Mar: Crimean parliament declares independence and formally applies to join Russia
- 18 Mar: Russian and Crimean leaders sign deal in Moscow to join the region to Russia
The crisis comes nearly a month after Ukraine's pro-Russian President Viktor Yanukovych was replaced by Western-leaning interim authorities.
Pro-Russian troops took control of Crimea in late February.
Ukraine has said it is drawing up plans to withdraw its thousands of soldiers and their families from Crimea for their own safety, and redeploy them on the mainland.
A number have already accepted Russia's offer to change sides, but many are still in their bases refusing to surrender.
Ukraine's navy headquarters in Sevastopol was one of two bases seized by pro-Russia forces in Crimea on Wednesday.
It was during the storming of the bases that the navy chief Serhiy Hayduk was taken away.
Moscow and Kiev had both urged his release, and Ukraine's presidency confirmed on Thursday morning that he and other Ukrainians taken from the navy HQ had been freed.
Earlier this week, a Ukrainian serviceman and a member of the pro-Russia self-defence force were killed in an incident in Simferopol.
Are you in Crimea or the wider region? What are your thoughts on recent events? Email us at haveyoursay@bbc.co.uk adding 'Crimea' in the subject heading and including your contact details.
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