Leaders of the G7 industrial nations meeting in Brussels say they are prepared to impose further sanctions on Russia over its actions in Ukraine.
G7 leaders want to send a strong message on Ukraine
A joint statement condemned Moscow for its "continuing violation" of Ukraine's sovereignty.
The G7 summit is the first since Russia was expelled from the group following its annexation of Crimea in March.
On Thursday, leaders are set to discuss the global economic outlook, climate change and development issues.
Although Russian President Vladimir Putin is not at the Brussels summit, he will hold face-to-face talks with some G7 leaders - not including US President Barack Obama - in Paris afterwards.
However, both Mr Putin and Mr Obama will attend a ceremony commemorating the 70th anniversary of the D-Day landings in France on Friday.
While in Poland on Wednesday, President Obama warned Moscow against what he called its "dark tactics" in Ukraine.
Diplomacy has intensified to try to resolve the biggest crisis in years between Russia and the West, says the BBC's Chris Morris in Brussels.
Angela Merkel said tougher sanctions against Russia were an option
'Further destabilisation'
G7 leaders gathered in Brussels on Wednesday evening for the summit's opening dinner.
"We are united in condemning the Russian Federation's continuing violation of the sovereignty and territorial integrity of Ukraine," the leaders said in a joint statement.
"We stand ready to intensify targeted sanctions and to consider meaningful additional restrictive measures to impose further costs on Russia should events so require."
German Chancellor Angela Merkel told reporters: "We can't afford a further destabilisation of Ukraine."
"We have made clear that we want to continue with our three-step approach - support Ukraine in economic issues, talks with Russia, and should there no progress on all those issues... the possibility of sanctions, tougher sanctions, remains on the table," she said.
Earlier, UK Prime Minister David Cameron said he expected the G7 to send a clear message of support for Ukraine.
The summit was originally to have been held in the Russian city of Sochi.
Speaking in Warsaw to mark 25 years since the fall of communism in Poland, Mr Obama hailed Polish democracy as a beacon for neighbouring Ukraine.
He also met Ukraine's President-elect Petro Poroshenko, and pledged support for plans to restore peace to the country.
But he also condemned what he called Russian "aggression" in eastern Ukraine,
"How can we allow the dark tactics of the 20th Century to define the 21st?" he said.
Mr Obama pledged $5m (£3m) of military assistance to Kiev including body armour and night-vision goggles.
Mr Poroshenko, a billionaire sweet manufacturer, was elected in May.
US President Barack Obama: "We stand together now and forever, for your freedom is ours"
He will be at the D-Day commemorations ahead of his inauguration on Saturday and said he did not rule out meeting Mr Putin.
Mr Putin told French TV he was "not going to avoid any of them" but said Mr Poroshenko needed to be serious about a dialogue with factions in eastern Ukraine.
"I think Mr Poroshenko has a unique opportunity. He still doesn't have blood on his hands. He still can stop this reprisal operation and start a direct dialogue with citizens of the south and the east of his country," he said.
Meanwhile, on the ground in Ukraine, separatist rebels have taken two military bases in the eastern region of Luhansk.
The chairman of the Donetsk People's Republic told the BBC's Steve Rosenberg there was a full-scale civil war in Ukraine
Separatists seized a border guard base after days of combat, and a National Guard base after an attack which began on Tuesday.
Fighting continues near the towns of Krasny Liman and Sloviansk in neighbouring Donetsk region.
Ukrainian sources say rebels are trying to break out of encirclements by government forces
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