A pro-Russian armed man looks on near the mayor's office in Slaviansk
A armed pro-Russian separatist near the mayor's office in SlavianskReuters

Western leaders are preparing a new round of economic sanctions against Russia, following further unrest in eastern Ukraine.

European foreign ministers announced at a meeting in Luxembourg that sanctions will be extended to include more individuals with close ties to the Kremlin.

Tensions have been rising in Ukraine after pro-Russian militias occupied a number of government buildings in the east of the country.

After meeting on Monday, European Union leaders said they had decided to expand "the list of those subject to assets freezes and visa bans."

Meanwhile, UK Foreign Secretary William Hague told reporters that he believed the seizure of buildings in eastern Ukraine "is something that is being planned and brought about by Russia".

For its part, Washington has shown more willingness to hit Russia with tougher sanctions that could target entire sectors of the economy including energy, finance and defence.

As Brussels considered further sanctions, Ukraine raised its benchmark interest rate in an attempt to prop up its ailing currency.

The Kiev central bank hiked the benchmark discount rate from 6.5% to 9.5% and the overnight loan rate from 7.5% to 14.5% on Monday night.

Ukraine's hryvnia currency has plunged in the past six months, while foreign currency reserves are dangerously low, as a result of the political crisis in the country.

"The central bank considers it necessary to take the step to increase the value of the national currency, to restrain inflation and to stabilise the situation on the money market," the bank said in a statement.

Moscow has applied economic pressure on Kiev, almost doubling the price it charges for gas and demanding immediate payment of $2.2bn in outstanding bills.

The International Monetary Fund has offered Ukraine's interim government aid worth $18bn, in return for strict austerity measures. The government is currently considering the deal.

The EU, Russia, Ukraine and the US are due to meet for talks over the crisis in Geneva on Thursday.