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European countries must be prepared to absorb the impact of economic sanctions on Russia in order to encourage president Vladimir Putin’s regime to behave “properly” in Ukraine, Foreign Secretary Philip Hammond has said.

Mr Hammond was speaking after the European Union and US agreed new measures targeting sectors of the Russian economy in the wake of the downing of Malaysia Airlines flight MH17, which has been blamed on Moscow-backed rebels in Ukraine.

The new EU sanctions include an arms embargo, a ban on the sale of dual use and sensitive technologies, and a ban on the sale of bonds and equities by state-owned Russian banks in European capital markets.

Eight more officials – including four members of Mr Putin’s inner circle – are also expected to face asset bans and travel freezes.

The White House swiftly followed up the EU’s announcement with a fresh round of sanctions of its own, targeting three Russian banks.

Mr Hammond said the measures had been “designed to maximise the impact on Russia and minimise the impact on EU economies”.

But he added: “You can’t make an omelette without breaking eggs, and if we want to impose economic pain on Russia in order to try to encourage it to behave properly in eastern Ukraine and to give access to the crash site, then we have to be prepared to take these measures.”

US president Barack Obama said: “Today Russia is once again isolating itself from the international community, setting back decades of genuine progress. It does not have to be this way. This a choice Russia and president Putin has made.”

In the Ukraine international observers were again turned back from attempt to reach the crash site.

Observers from the Organisation for Security and Co-operation in Europe (OSCE) set out in two vehicles yesterday without crash investigators from the Netherlands who have been trying to reach the site for days.

The OSCE observers turned back to the city of Donetsk after discussions with rebels.

Safety concerns and hindrance from the separatists who control the area have kept the investigation team away. Foreign governments whose citizens died have complained the site is not secured and some human remains have not been recovered.

Ukraine government security spokesman Andriy Lysenko warned separatists “have mined the approaches to this area. This makes the work of the international experts impossible”.

Mr Lysenko said Ukrainian troops are not conducting operations against the separatists near the site, but are trying to cut off their supply lines to force them to leave the area.

Elsewhere, Ukrainian forces have taken control of the town of Avdeevka, just to the north of the rebel stronghold of Donetsk. Local officials said fighting over the past 24 hours killed 19 people in the region.

The fallout from the plane crash is putting Russia under increasing pressure as it counts the potential cost of Western sanctions targeting its key energy and finance sectors, with its central bank promising to support lenders hit with penalties.

The reaction in the stock markets in Moscow was mixed, as investors had sold off shares in Russian companies for the past two weeks after MH17 was downed.

Analysts warn that with most large state-owned banks cut off from Western funding, the long-term impact of sanctions on Russia’s growth could be severe. The International Monetary Fund already has slashed Russia’s growth forecast for this year to nearly zero, down from 1.3 per cent.