The European Union is expected to cut off large-scale financing to Russia and widen sanctions against companies at a summit on Wednesday evening, blaming Moscow for supporting the increasingly bloody conflict in eastern Ukraine.

European leaders will seek to suspend the financing of new public-sector projects in Russia by the EU's lending institution, the European Investment Bank, and the European Bank for Reconstruction and Development, according to a draft statement seen by news agencies on Wednesday.

The move could cut Russia off from significant funding, as the EIB promised to lend more than €1bn to Russia last year, while the London-based EBRD lent it €1.8bn.

The EU is also expected to expand asset freezes to organisations "are supporting, materially or financially, actions undermining or threatening Ukraine's sovereignty, territorial integrity and independence", the statement said.

Nationalist Russian oligarchs have been known to finance separatist activities in Crimea, and former employees of one such tycoon now head the government and military of the self-declared Donetsk People's Republic.

The EU will ask the commission to consider suspending bilateral and regional cooperation programmes of the union set up to provide €450m to Russia between 2014 and 2020.

The punitive actions come after EU leaders called on Vladimir Putin, at the end of June, to take measures to reduce the violence in Ukraine. The draft statement said these steps had "not been fully met".

The US has been pushing its European partners to take stronger action against Russia, and is also considering unilateral sanctions against the country's financial sector and defence industry, to be implemented as soon as this week, official sources said on condition of anonymity.

Washington and Kiev have pointed the finger at Russia for supporting the conflict in east Ukraine, which intensified after Ukrainian forces recaptured a rebel stronghold this month. Pro-Russian rebels there have been fighting with government troops for more than three months, and more than 550 people have been killed. Eleven Ukrainian soldiers were reportedly killed on Tuesday, and one person was killed and nine wounded in fighting in Lugansk on Wednesday.

Ukrainian defence officials said that an An-26 military plane, which was shot down on Monday, had been flying too high to have been hit by a portable surface-to-air missile and suggested a more powerful weapon had been fired from Russian territory.

On Tuesday, a Ukrainian military spokesman said an "unknown plane" had carried out a "cynical provocation" in the border town of Snezhnoye, where 11 people were killed and eight wounded after an airstrike tore the side off an apartment building. As the rebels have not used aircraft in the conflict, it appeared that he was levelling an accusation against Russia.

Moscow has not responded to the incidents, but it accused Ukrainian troops of firing a shell over its border this weekend, killing a Russian citizen and injuring two others.

In a statement on Monday, the US state department said Russia had continued to provide rebels "with heavy weapons, other military equipment and financing, and continues to allow militants to enter Ukraine freely". Moscow had also refused to insist that rebels laid down their arms and continued to mass its troops along the Ukrainian border, it said.

Officials from Ukraine, Russia and the Organisation for Security and Cooperation in Europe, were slated to restart peace talks with rebel leaders on Tuesday, but the planned video call fell through.

In a statement, the OSCE said this setback showed a "lack of willingness" on the part of the rebels to engage in ceasefire talks. But Oleg Tsaryov, a pro-Moscow Ukrainian politician, claimed that rebel leaders had not been invited to any such video call, reiterating that government forces had to be pulled back before a ceasefire could be reached.

Previously, the EU has implemented asset freezes and travel bans against 72 people and two companies connected to Russia's annexation of Crimea and the crisis in Ukraine. It has also considered sanctions on sectors of the Russian economy, but this much more drastic measure requires unanimity in the 28-member organisation. It has been blocked by countries including France, which has gone ahead with a €1.2bn deal to sell two state-of-the-art Mistral warships to Russia.