RUSSIA has begun a fightback against the West, saying it was not responsible for arming the Ukrainian separatists blamed for downing Malaysian Airlines Flight MH17 and that any economic sanctions against it would be "illegal, unreasonable and counter-productive".

The Kremlin's defiance came as EU ambassadors began to consider far-reaching sanctions, covering Russian access to European capital markets, defence, dual use goods and sensitive technologies.

One option is a ban on all Europeans from buying new debt or stock from Russian banks, which could be imposed over summer.

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Sources out of Brussels suggested even the German Government is considering the option of targeting large swathes of the Russian economy, which is already on the brink of recession, if Moscow failed to act to de-escalate the continuing crisis in eastern Ukraine.

Any such move on so-called Tier 3 sanctions would be a significant shift as Germany is heavily reliant on Russia for energy.

Thus far, the emphasis has been on tightening and extending Tier 2 sanctions, travel bans and asset freezes against individuals and firms, including some of Vladimir Putin's "cronies".

Last week, the US upped its measures by targeting, among other companies, Rosneft, Russia's largest oil producer.

Alexander Yakovenko, the Russian ambassador to London, warned any decision by the EU to introduce far-reaching economic sanctions would be "illegal, unreasonable and counter-productive" and could precipitate a new phase in the global financial crisis.

He also insisted claims by Kiev and Washington that Moscow and the pro-Russia separatists were behind the downing of the Malaysian plane did not "hold water", saying: "Russia doesn't supply weapons to local de facto (separatist) authorities in eastern Ukraine. No evidence whatsoever has been presented that the Russian Government has been doing this."

Meanwhile, as 51 more bodies arrived in Eindhoven to begin the delicate process of identification - 40 arrived on Wednesday - investigators from the Dutch Safety Board allayed earlier fears and said they had found no evidence that either of the Malaysian Airlines Boeing 777's two black boxes had been tampered with.