Vladimir Putin has warned a fresh wave of sanctions will take US relations with Russia to "a dead end" and damage America's business interests.

The United States and the European Union have stepped up measures over what is viewed as Russia's interference in Ukraine.

US President Barack Obama has imposed the most wide-ranging sanctions yet, targeting major banks, energy and defence firms - including Gazprombank and Rosneft Oil Co.

Steps are also being taken to prevent rebel groups and senior officials in Ukraine getting hold of funds.

"Sanctions have a boomerang effect and without any doubt they will push US-Russian relations into a dead end, and cause very serious damage" Mr Putin said.

"And I am convinced that this will harm the national long-term interests of the American state, the American people".

Mr Obama said the US measures were "significant but targeted".

"I've repeatedly made it clear that Russia must halt the flow of weapons and fighters across the border into Ukraine. So far, Russia has failed to take any of the steps that I mentioned".

Meanwhile, EU leaders meeting in Brussels agreed a more limited package.

They agreed to impose asset freezes against around 11 more individuals - but said measures will be expanded significantly at the end of July to cover "entities and persons" helping to undermine Ukraine's "sovereignty, territorial integrity and independence".

The European Commission will also "reassess and potentially suspend" co-operation programmes with Russia.