European Union leaders at Saturday's Brussels summit were set to ask the European Commission and the EU's diplomatic service "to urgently undertake preparatory work" on further sanctions against Russia, according to a draft statement, after Ukraine accused Russia of sending soldiers across the border.
French President Francois Hollande stressed that a failure by Russia to reverse a flow of weapons and troops into eastern Ukraine would force the bloc to impose new economic measures.
"Are we going to let the situation worsen, until it leads to war?" Hollande said at a news conference. "Because that's the risk today. There is no time to waste."
European Commission President Jose Manuel Barroso said the EU was prepared to toughen sanctions against Russia but also that it wanted a political deal to end the confrontation.
"We are ready to take very strong and clear measures but we are keeping our doors open to a political solution," Barroso said at a news conference with Ukraine's president.
Ukraine called on Friday for full membership in NATO, its strongest plea yet for Western military help, after accusing Russia of sending in armored columns that have driven back its forces on behalf of pro-Moscow rebels. Russia has dismissed allegations of an incursion into Ukrainian territory, and said that hundreds of Ukraine's soldiers had crossed into its territory in recent months.
Russian President Vladimir Putin compared Kiev's drive to regain control of its rebel-controlled eastern cities to the Nazi invasion of the Soviet Union in World War Two. He announced that separatists had succeeded in halting the Ukrainian troops’ advance, and proposed that the rebels now permit the surrounded soldiers to retreat, which they accepted.
Speaking to young people at a summer camp, Putin told his countrymen they must be "ready to repel any aggression towards Russia." He described Ukrainians and Russians as "practically one people," language that Ukrainians say dismisses the very existence of their thousand-year-old nation.
In Donetsk, one of the main separatist strongholds, several shells exploded in the area of the railway station on Friday, one hitting the station building and another striking a trolleybus.
Kiev said it was rallying to defend the port of Mariupol, the next big city in the path of the pro-Russian advance in the southeast.
"Fortifications are being built. Local people are coming out to help our troops, to stop the city being taken. We are ready to repel any offensive on Mariupol," military spokesman Andriy Lysenko said.
So far, the West had made clear it is not prepared to fight to protect Ukraine but is instead relying on economic sanctions, first imposed after Russia annexed Ukraine's Crimea peninsula in March and tightened several times since.
Those sanctions seem to have done little to deter Putin, leaving Western politicians to seek tougher measures without crippling their own economies, particularly in Europe, which relies on Russian energy exports.
European foreign ministers met in Milan on Friday ahead of a weekend EU summit. They made clear the bloc will discuss further economic sanctions against Moscow. Some said that was no longer sufficient, and other measures to help Kiev should be discussed.
Were NATO to extend its mutual defense pact to Ukraine, it would be the biggest change in the security architecture of Europe since the 1990s. After the Cold War, NATO defied Russian objections and granted its security guarantee to ex-Communist countries like Poland, Hungary and Romania. But it largely stopped at the border of the former Soviet Union, admitting only the three Baltic states Latvia, Lithuania and Estonia.
This year, after Putin annexed Crimea, NATO countries including the United States have repeatedly said they would be prepared to go to war to protect any member, but not to defend non-member Ukraine.
Kiev hopes to get its message across to Russians that their government is waging war without telling them. Ukrainian Defense Minister Valery Heletey said many Russian soldiers had been captured and killed. "Unfortunately, they have been buried simply under building rubble. We are trying to find their bodies to return them to their mothers for burial," Heletey said.
Russia's Defense Ministry again denied the presence of its soldiers in Ukraine: "We have noticed the launch of this informational 'canard' and are obliged to disappoint its overseas authors and their few apologists in Russia," a ministry official told Interfax news agency.