Confrontation between Russia and the West triggered by the Ukraine crisis escalated further with EU and Washington threatening tougher sanctions on Moscow, which experts warned would inevitably take toll on economies of both parties.

TOUGHER SANCTIONS ON RUSSIA

On Wednesday, the leaders of the Group of Seven (G7) industrialized nations threatened more sanctions against Russia as they accused Moscow of continuing its destabilizing actions in eastern Ukraine.

The tougher steps came just two days after the EU approved a package of "significant" additional restrictive measures targeting Russia's finance, defense and energy sectors and Washington expanded its sanctions to more Russian banks and defense companies and blocked the export of specific goods and technology to Russia's energy sector.

The punitive measures was driven by what the West called Russia's continued support for rebels in eastern Ukraine and allegations that Russia has been involved in the July 17 downing of the Malaysia Airlines Flight 17 in eastern Ukraine, which killed all 298 people on board.

The West has been claiming that pro-independence insurgents in Ukraine's east shot down the MH17 with a surface-to-air missile.

Shrugging off the accusations, Russia demanded the United States make public its relevant satellite pictures while saying Kiev should be blamed for tensions in eastern Ukraine that led to the downing of MH17 and hampered the investigation into the crash of the aircraft.

On Wednesday, the leaders of G7 -- Britain, Canada, France, Germany, Italy, Japan and the United States -- plus the presidents of the European Council and the European Commission, voiced their "grave concern" about "Russia's continued actions to undermine Ukraine's sovereignty, territorial integrity and independence."

"We once again condemn Russia's illegal annexation of Crimea, and actions to de-stabilize eastern Ukraine," they said in a statement released by the White House. "Those actions are unacceptable and violate international law."

"Russia still has the opportunity to choose the path of de-escalation, which would lead to the removal of these sanctions," they added. "If it does not do so, however, we remain ready to further intensify the costs of its adverse actions."

In their statement, the G7 leaders condemned the downing of MH17 and demanded "a prompt, full, unimpeded and transparent international investigation."

Heavy fighting between the rebels and government forces were still preventing international experts from reaching the MH17 crash site on Wednesday.

"We call upon all sides to establish, maintain and fully respect a cease-fire at and around the crash site, as demanded by UN Security Council resolution 2166, so that the investigators can take up their work and to recover the remains of all victims and their personal possessions," the G7 leaders said.

They urged Russia to end its support for rebels in eastern Ukraine and secure its border to stop the flow of weapons, equipment and militants, an allegation rejected by Moscow.

MOSCOW SLAMS SANCTIONS, VOWS TO HIT BACK

Russia criticized the latest sanctions imposed by the United States and the EU and vowed to countervail them through boosting domestic market.

The Russian Foreign Ministry said Wednesday the U.S. sanctions are a revenge on Russia, warning they would cause real losses and complicate the Russian-American relations.

"There is an impression that the American sanctions have only one aim: to get even with Russia for our independent policy which is inconvenient for the United States," the ministry said in a statement.

"Such decisions by Washington will only further complicate the Russian-American relations and create an unfavorable atmosphere for international affairs, since interactions between the two countries often play a decisive role," the statement added.

Moreover, the ministry refuted as "bewildering" Obama's accusation that Russia is not cooperating with international investigation into the MH17 crash.

"Russia was one of the first countries that gave its objective data over the crash, while the United States has still not provided any facts, except for groundless accusations and data collected from social networks," ministry spokesman Alexander Lukashevich said.

He added that Russia received the invitation to participate in the investigation of the crash just several days ago and appointed representatives immediately.

Meanwhile, Russia said the EU sanctions against Russia run counter to the World Trade Organization rules and would have adverse effects on EU countries especially their banks operating in Russia.

The tougher sanctions will limit the access of Russian state-owned financial institutions to EU capital markets, impose an arms embargo, establish an export ban on dual-use goods for military end users, and curtail Russian access to sensitive technologies particularly in the oil sector.

Moscow warned the EU should get ready for serious economic costs, saying the EU economy will suffer from no less negative effects than Russia.

"The EU voluntarily creates obstacles for further cooperation with Russia in such a key sphere as energy, which is a thoughtless,irresponsible step. It will be the European energy market that pays the price," the Russian Foreign Ministry said.

The ministry also accused the EU of being manipulated by "Washington's dictation," and said Moscow is disappointed by the bloc's inability to play an independent role in global affairs.

Meanwhile, Russia said it will overcome possible economic difficulties that will be caused by the new sanctions through a series of measures to boost domestic economy.

Sergei Chemezov, head of the state-controlled conglomerate Rostec, said the key to countervail the sanctions is to implement import-substituting programs that will spur industrial growth in Russia.

"We must be prepared for external demand restrictions by the West. Therefore, we must link industrial growth prospects to internal expenditures and domestic market development in the first place," Chemezov said.

Deputy Prime Minister Dmitry Rogozin said Wednesday Russia will replace components for weapons and military equipment imported from Ukraine with home-made products in two and a half to three years.

Trade and Industry Minister Denis Manturov said in June that import substitution will allow Russian enterprises to earn additional production volume of more than 88 million U.S. dollars a year starting from 2015.

EU COUNTRIES CONCERNED ABOUT SANCTIONS

Some EU countries have expressed their concerns about the negative impact the sanctions against Russia could exert on their economies.

Experts from the Federation of Finnish Technology Industries said sanctions targeting Russian financial sectors will seriously affect Finnish exports to Russia.

Russian companies' difficult access to finance will have a significant impact on their ability to make investment, and Finnish companies' access to finance in Russia will also become problematic, said Jorma Turunen, managing director of the federation.

Russia is the most important trading partner of Finland. Russia's share of Finland's exports last year was 10 percent. Jukka Palokangas, chief economist from the federation, estimated that the Finnish exports to Russia will drop in the next five years.

Meanwhile, Russia will temporarily suspend the import of most of Polish fruits and vegetables since the beginning of August.

Although the Russian authorities said the suspension is a result of the "systematic violations of Russian and international phytosanitary requirements by the Polish products entering Russia," many see it as Russia's response to the EU sanctions.

Christoph Leitl, president of the Austrian Federal Economic Chambers, said business should not be "misused" as an instrument of politics.

He cautioned that Austrian exports to Russia would likely fall by one fifth this year on the back of current development.

Against this backdrop, financial experts urged EU companies to reorient themselves to new markets to avoid adverse impact brought by the sanctions.