US threatens tougher action against Russia over Ukraine

US Treasury Secretary Jack Lew said on Wednesday that Washington was ready to increase sanctions on Russia over its actions in war-torn Ukraine.

Lew's comments during a visit to Kiev came one day after EU heads of state threatened to impose further financial measures against Moscow in response to the latest upsurge in violence in Ukraine's nine-month war.

"Our first choice is a diplomatic resolution that allows us to lessen sanctions. But we are prepared to do more if necessary. To that end, we'll continue to work with our allies to increase the pressure on Russia," Lew told reporters.

Russia denies backing the eastern insurgents and claims that past measures against it are meant at undermining President Vladimir Putin's 15-year rule.

"At the same time, we've been clear from the beginning: if Moscow fully implements its obligations pursuant to the Minsk agreement, sanctions against Russia could be eased," Lew added.

He also told his Ukrainian counterpart Natalie Jaresko — a US national confirmed to her post last month — that Washington was ready to provide up to $3 billion in support should Kiev press ahead with overdue economic restructuring measures.

"Ukraine's government continues to forge ahead with the implementation of its ambitious reform agenda and it needs the support of the international community to make progress," Lew said.

He said $1 billion more could be added to a past loan of the same amount in the first half of the year.

"We are also proposing to our Congress that we provide an additional $1 billion for a total of $3 billion of loan guarantees as long as Ukraine continues to make concrete progress on its reform agenda and continues to require support," he said.

Ukraine's economy shrank by nearly eight percent last year and Kiev is currently facing a massive foreign debt burden that threatens to put it into default within the next few months.

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