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 existed.
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.
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 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 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 Matthew Price in Brussels say some believe the first stage of a seismic shift in EU-Russian relations is taking place.
But this will take years, not days, to come about, he adds, and if the leaders are serious they will need to reduce Europe's reliance on Russian gas.
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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.
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
In other developments:
- UN Secretary General Ban Ki-moon will meet President Putin in Moscow on Thursday before travelling to Kiev on Friday
- Russia has reportedly taken control of a confectionery factory in Lipetsk, Russia, owed by Ukrainian tycoon Petro Poroshenko. He was a key supporter of the protests against President Viktor Yanukovych
- President Barack Obama ruled out military involvement in Ukraine, saying the US "do not need to trigger an actual war"
- Ukraine's ambassador to the UN, Yurii Klymenko, told diplomats in Geneva there are "indications that Russia is on its way to unleash a full blown military intervention in Ukraine's east and south". Russia dismissed the warning
- Crimea's PM says a 17-year-old Ukrainian has been arrested over an incident in Simferopol on Tuesday in which a Ukrainian soldier and a member of the pro-Russia self-defence force were killed
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.
At least two bases - in Sevastopol and Novo-Ozyorne - were taken over by pro-Russian forces on Wednesday.
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.
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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