German Chancellor Angela Merkel has warned Russia to expect escalating EU sanctions if steps are not taken to calm the situation over Crimea.

Merkel was speaking ahead of an EU summit where increasing penalties against Russia are due to be discussed.

She turned her attention to the G8 of which Russia is a member: “As long as the political settings for something as important as the G8 are not guaranteed then that means the G8 does not exist at present, neither the summit nor the format as such.”

The G8 is scheduled to hold a summit in the Russian city of Sochi, the venue for the recent Winter Olympics, in June.

As rifts deepen Russia has said it will demand compensation from France if Paris rips up a contract to provide Moscow with two Mistral helicopter-carrier ships.

France is considering suspending the deal in response to Russian moves in Crimea.