Britain is to join forces with its Nato allies to help bolster defences of the Baltic states amid fears that Moscow may use the presence of substantial Russian minorities to destabilise Latvia, Lithuania and Estonia.

As Downing Street indicated that the leaders of the G7 countries were likely to punish Moscow for its annexation of Crimea by mothballing the larger G8, which includes Russia, the prime minister said Nato would send a "very clear message" to show it believed in the security of all its members.

But Cameron, who was speaking as he prepared to travel to The Hague for a nuclear security summit and a meeting of the G7, ruled out a call by the former head of the army to recruit an extra 3,000 British troops to be deployed in Germany. Lord Dannatt, chief of the general staff from 2006 to 2008, wrote in the Daily Telegraph that an extra deployable brigade would show that Britain took its defence duties seriously on its own behalf and "on behalf of our EU and Nato allies, too".

The prime minister told ITV News: "I don't think it's necessary to change our plans to base British soldiers in Britain but I think what is important is that we send a very clear message to our Nato partners and allies that we believe in Nato and we believe in their security. That's why, for instance, we're helping some of the Baltic states with their defence and their needs. That's what we should be doing and that's what we're very much committed to doing."

The prime minister's remarks highlighted Britain's support for the "collective defence" principle of Nato. Under article 5 of the North Atlantic treaty, all Nato members agree that an armed attack against one member is an attack against all.

Downing Street indicated that leaders of the G7 – the UK, US, France, Germany, Italy, Canada and Japan – would move to isolate Russia when they met after the nuclear security summit in The Hague on Monday afternoon. Vladimir Putin, who was due to attend the nuclear security summit, has sent his foreign minister, Sergei Lavrov, after it became clear that a G7 meeting would be held to exclude Russia.

The prime minister's spokesman indicated that the G8 would be mothballed. The spokesman said a "clear message was being sent to Moscow if it continues to choose the path towards greater isolation". The spokesman added: "This is the first G7 heads of government meeting since the G7 was extended to the G8 more than a decade ago. All preparatory work for the G8 meeting in Sochi [in June] has been suspended. The prime minister's view is that it would be unthinkable for the G8 in Sochi to go ahead in current circumstances. The future of the 'G' grouping is the main item for their discussion later this afternoon."

Downing Street voiced support in the EU for the next phase of sanctions which would focus on financial targets. But the spokesman indicated that such a phase, due to be triggered if Russia further destabilised Ukraine, had not yet been engaged despite armed Russian troops taking over a Ukrainian naval base in Crimea.

The spokesman said: "It is clear evidence of a failure to de-escalate and a failure to engage in the dialogue that is so important with the Ukrainian authorities."

On possible further sanctions, the spokesman said: "It is right that work is being done to prepare what further measures may need to be taken."

Britain is showing its support for Latvia and Lithuania as David Lidington, the Europe minister, embarks on a two day visit to the two Baltic states on Monday. The prime minister's spokesman said: "It is an opportunity to underline our commitment to those countries."