Brussels: After months of hesitation, the EU on Saturday agreed to impose economic sanctions against Russia, hoping this "strong warning" would make it change course in Ukraine as fighting intensified around cities held by pro-Russian rebels.
But at the same time the European Union told Moscow that should it reconsider its policy on Ukraine, the 28-nation bloc also could shift course, despite all the damage done.
The new measures impose restrictions on the finance, defence and energy sectors so as to increase the cost to Russia of its continued intervention in Ukraine.
Notably, Russian state-owned banks will find access to European financial markets limited, meaning their costs could rise, with a knock-on effect on Russia's struggling economy.
The measures are "a strong warning (that the) illegal annexation of (Crimea) and deliberate destabilisation of a neighbouring sovereign country cannot be accepted in 21st century Europe," said Herman Van Rompuy, president of the European Council.
If Russia does not change direction, "it will find itself increasingly isolated by its own actions," Van Rompuy said in a statement.
"The European Union will fulfil its obligations to protect and ensure the security of its citizens. And the European Union will stand by its neighbours and partners," the statement added, apparently referring to other ex-Soviet states now EU partners Georgia and Moldova.
The EU however "remains ready to reverse its decisions and re-engage with Russia when it starts contributing actively and without ambiguities to finding a solution," he added.
For months since the crisis broke in November, the EU had restricted itself to so-called 'Phase 2' asset freezes and visa bans on those implicated in or profiting from the Ukraine crisis.
Washington complained such measures were not enough, suggesting that Brussels was being held back by the EU's extensive economic ties with Russia, which supplies a third of the bloc's gas and is a major trade partner.
The loss of Malaysia Airlines flight MH17, however, dramatically changed thinking, even among holdouts such as Germany and Italy, and put broad 'Phase 3' economic sanctions at the top of the EU agenda.
"The decision today was inevitable," German Chancellor Angela Merkel said in a statement that also urged the Russian leadership to "pursue the path of de-escalation and cooperation" in the Ukraine conflict, warning of further steps if it does not.
US Secretary of State John Kerry said separately that Washington was also "preparing additional sanctions, with Europe," adding that Russian President Vladimir Putin "still has a choice" in what course to take in Ukraine.