David Cameron has promised action against Russia "within days" if President Putin fails to agree to talks on the future of Ukraine and the creation of a contact group to end the crisis.
Pressed by Labour leader Ed Miliband during a Commons statement, the prime minister offered his toughest message yet, agreeing the current situation was a "test of EU resolve" and that moves to impose travel bans and freeze some assets should happen quickly.
He also repeated his insistence that the planned Crimea referendum on joining Russia was illegal and would be deemed illegitimate by the EU.
In any case, he said, the referendum would be impractical because there was no electoral roll, no campaigns, and it would be taking place in a region full of troops
But he said ways could be found in the future to allow the people of Crimea to express their view in a legitimate way that would be recognised by the rest of the world.
Cameron was delivering a statement following the recent special EU summit to discuss the crisis.
He told MPs the summit had agreed that if further steps were taken by Russia to destabilise the Ukraine, "there will be additional and far‑reaching consequences for the relationship between the Russian Federation on the one hand and the European Union and its member states on the other.
"And the conclusions state that these consequences would – and I quote - include a broad range of economic areas," he said.
He warned that such moves would have have consequences for many EU member states including Britain, adding: "But as I argued at the meeting, the costs of not standing up to aggression are far greater.
"Britain's own security and prosperity would be at risk if we allow a situation where countries can just flout international rules without incurring consequences," he said.
He again won support from Labour and agreed when Miliband called for new measures to be taken within days.
The prime minister's response is the clearest indication so far of exactly how the EU and UK will respond, with the acceptance that they will pay a price through retaliation.
There is a "three phase" process. The first including the suspension of the planned G8 meeting in Russia, suspension of talks on more liberal visa arrangements and a review of licenses for arms exports to Russia.
Phase two would include asset freezes and travel bans. The third phase would be the "broad range of economic" measures.