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Tom Burridge on the fighting near the MH17 crash site
The European Union is set to agree new sanctions against Russia, targeting its finance, energy and defence sectors over the conflict in Ukraine.
Top Russian individuals and bodies are already the subject of EU sanctions for their alleged role in Ukraine's crisis.
Calls for the EU to act have been fuelled by the downing of flight MH17.
An international team has again failed to access the crash site in eastern Ukraine, amid heavy fighting between government forces and rebels there.
The team, which includes Dutch and Australian police officers, has twice had to abandon attempts to reach the site in the past two days.
A third mission, on Tuesday, also failed to proceed because of the fighting. Dutch Prime Minister Mark Rutte has asked Ukrainian President Petro Poroshenko to "halt hostilities" around the crash site, according to a spokesman for Mr Rutte, quoted by AFP news agency.
Many of the 298 people travelling aboard Malaysia Airlines flight MH17 were Dutch or Australian.
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Families of MH17 victims are waiting to hear which bodies have been identified, as Anna Holligan reports
Ukraine's army said on Monday that it had managed to capture two towns near the wreckage of the plane, in its drive to encircle pro-Russian rebels in the Donetsk region.
In the latest developments:
- Ukraine says its troops have entered the towns of Shakhtarsk and Torez in Donetsk region, and Lutuhyne in Luhansk region
- Ten Ukrainian soldiers and 17 civilians have reportedly been killed in the last 24 hours
- A group of hackers sympathetic to the rebels says it has disabled the website of the Ukrainian president.
Analysis by the BBC's Gavin Hewitt
Europe's leaders did not want to move to economic sanctions but they were moved by two considerations: the outrage at the way investigators have been blocked from access to the crash site of the downed plane and, secondly, the fact that Russia, since the incident, has been allowing heavy weapons across the border into Ukraine.
The calculation in Europe is that it had to act for its own credibility and that it may have to go further to ensure that President Vladimir Putin and his inner circle understand that their actions carry consequences.
How will Russia respond? Hard to say, although Foreign Minister Sergei Lavrov said Russia would not retaliate or "fall into hysterics".
But - if all goes as expected - the EU will today take a significant step; that it has to risk some damage to its own economic interests in order to put pressure on President Putin and Russia.
Ukraine conflict: EU squeezes Russia
'Further costs'EU ambassadors in Brussels have begun a meeting that is expected to lead to fresh sanctions. The meeting ends on Tuesday afternoon.
The fresh measures under discussion include restrictions on Russian banks accessing European markets, an arms embargo and curbs on dealings with the energy sector.
The leaders of France, Germany, Britain and the US already discussed possible sanctions in a conference call on Monday.
A spokeswoman for UK Prime Minister David Cameron later said that he and fellow European leaders had agreed to "impose further costs on Russia" for supporting the rebels in Ukraine.
A German government spokeswoman, quoted by Associated Press, said her country was pressing for a "substantial, sector-specific package of measures" against Russia.
Western nations have accused Russia of equipping the uprising in Ukraine with heavy weapons - including the missile that brought down flight MH17.
Russia has denied the charge. Russia and the rebels blame Ukrainian government forces for the attack on the airliner.
Any new EU sanctions could come into force within 24 hours of a deal being reached between the bloc's 28 member states.
Sanctions warningLast weekend, the EU subjected a further 15 Russian individuals and 18 entities to asset freezes and visa bans for their alleged involvement in the Ukraine conflict.
The list of 87 targets of EU sanctions now includes the heads of the Federal Security Service (FSB) and foreign intelligence, the president of Chechnya, as well as two Crimean energy firms.
However, UK company British Petroleum, which owns nearly 20% of Russian state oil giant Rosneft, has warned that further sanctions against Russia could "adversely impact" its performance.
Meanwhile, Russia's foreign ministry has dismissed a UN human rights report on the Ukraine conflict as "unobjective and even hypocritical".
The UN's human rights chief warned on Monday that the downing of MH17 may be a "war crime".
The world body's latest report says at least 1,129 people have been killed and 3,442 wounded in the fighting in Ukraine since mid-April. The violence has displaced more than 200,000 people, many of them fleeing east to neighbouring Russia.
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