Ukraine crisis: EU to impose toughest sanctions yet on Russian banks and energy firms

New sanctions on Russian banks and energy companies are due to be finalised today by the European Union in an effort to increase pressure on Moscow over its involvement in Ukraine.

Britain admitted the measures would inflict “pain” on the City of London, but said they should be seen in the context of the deaths of nearly 300 passengers on the MH17 flight.

Oil giant BP today warned that further international sanctions on Russia could have a "material adverse impact" on the company.

The company, which continues to grapple with the costs of the Gulf of Mexico oil disaster in 2010, which left 11 workers dead and sparked the worst oil spill in US history. The total charge recognised to date stands at 43 billion US dollars (£25.3 billion).

Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers, said another solid quarter from the company "underlined BP's status as a stock which is well on the way to recovery".

However, he warned that the remaining liabilities from the Gulf of Mexico spill were not totally clear and that the company's outlook for the current quarter was less positive given planned maintenance activities.

"The real sting in the tail could come from BP's 20% stake in Rosneft, depending on the severity of any further sanctions imposed on Russia," he added.

EU ambassadors are set to approve fresh sanctions covering the financial sector, energy exploration technology and arms sales. It will be the first time that entire sectors, rather than individuals or firms, have been targeted by the West.

It is understood the United States will announce similar sanctions in coordination with the EU.

A Downing Street spokeswoman said the measures could in theory be imposed within 24 to 48 hours of being agreed.

The Ukraine crisis was discussed in a five-way telephone call between David Cameron, President Barack Obama, German Chancellor Angela Merkel, French President Francois Hollande and Italian Prime Minister Matteo Renzi. Mr Cameron is due to meet the relatives of Britons killed in the disaster tomorrow.

Downing Street said the latest evidence showed Russia continued to transfer weapons into Ukraine and to provide practical support to the separatists.

A spokesperson said: “The leaders agreed the international community should therefore impose further costs on Russia and specifically that ambassadors from across the EU should agree a strong package of sectoral sanctions as swiftly as possible.

“They agreed the EU and United States should continue to work together to exert pressure on Russia to change course and to engage in a political resolution to the crisis before more innocent lives are lost.”

The EU is likely to ban Russian banks from selling newly issued bonds or stock on European markets, a move that could hit Britain harder than any other country.

The Downing Street spokesperson said: “We’ve been told there will be the possibility for some pain to be felt here in the UK in terms of these measures. But you have to look much more broadly at the wider crisis and the fact you have had a passenger airline shot out the skies with 298 people losing their lives.”

The sanctions in the energy sector will focus on sales of equipment for deep-sea drilling and shale gas. The EU will steer clear of wider action on gas imports, as many members of the bloc are heavily reliant on Russian supplies.

Future arms deals with Moscow will be banned, but existing contracts will be honoured, allowing France to proceed with the sale of the first of two Mistral class warships to Russia.