The European Union threatened to tighten sanctions against Russia within a week if Moscow fails to reverse its policy in Ukraine.

A European Council resolution asked Russia to "withdraw all its military assets and forces from Ukraine" immediately and called for a ceasefire.

EU's executive arm, the European Commission, will draft new sanctions proposals within a week, EU leaders said. The move came after Ukrainian President Petro Poroshenko warned his country was on the brink of a full-scale war with Russia, citing Russian troops' continued advances into his country.

Russian President Vladimir Putin, who warned the west not to mess with a nuclear armed Russia, has denied Kiev's charge that Moscow has sent in troops inside Ukraine.

However, pro-Russian rebels in eastern Ukraine made significant gains in recent days, worsening a face-off that has killed more than 2,500 people since April when Russia annexed Crimea citing a need to protect Russian-speaking citizens of the peninsula.

Though European leaders agree Moscow's heavily armed troops are tilting the balance in eastern Ukraine, they apparently failed to agree on specific sanctions against Moscow and issue a clear deadline for troop pullback to Putin.

European Council President Herman Van Rompuy said the bloc was "ready to take further significant steps in light of the evolution of the situation on the ground," BBC reported.

"Everybody is fully aware that we have to act quickly."

Briefing the EU leaders, Ukraine's Poroshenko said his country, which was moving briskly on with a process to join Nato, was very close to the 'point of no return' in the conflict with Russia.

Adding to the volatile situation, Russian President Vladimir Putin has warned against confronting a "nuclear-armed Russia."

"I want to remind you that Russia is one of the most powerful nuclear nations. This is a reality, not just words. We must always be ready to repel any aggression against Russia and [potential enemies] should be aware... it is better not to come against Russia as regards a possible armed conflict," the Russian leader told a gathering of young men.