German Chancellor Angela Merkel has issued a stark warning to Russia, saying it would suffer "massive" economic and political damage if it did not change its course over Ukraine.

In an address to the German Bundestag on Thursday, Merkel told politicians that the European Union was ready to impose sanctions if Russia refused to enter into diplomatic talks to end the crisis in Ukraine.

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She said: "If Russia continues on its course of the past weeks, it will not only be a catastrophe for Ukraine. We would not only see it, also as neighbours of Russia, as a threat. And it would not only change the European Union's relationship with Russia.

"No, this would also cause massive damage to Russia, economically and politically."

Controversy over Crimea

Merkel also said Ukraine's territorial integrity was "not up for discussion" - a reference to this Sunday's vote on whether the Crimea peninsula should retain connections with Kiev or join the Russian Federation. The region has a significant ethnic Russian population.

Pro-Russian troops moved into Crimea after Ukraine's pro-Kremlin leader Viktor Yanukovich was ousted by parliament on February 22.

Since then the peninsula has seen clashes between groups whose loyalties are divided between Moscow and Kiev. A deteriorating security situation, with armed men taking over military installations, has caused alarm in Europe and the US.

President Vladimir Putin maintains that Russia has the right to use force to protect its citizens in Ukraine.

Security Council meeting

But frantic diplomacy, which has seen foreign leader fly thousands of miles to resolve the crisis, has not yet persuaded Russia to scale back its actions on rhetoric.

On Thursday, Ukraine Prime Minister Arseniy Yatsenyuk is due to meet members of the United Nations Security Council in New York, while US Senator John McCain and other US politicians are expected to fly into Kiev to express their solidarity with a government struggling to protect its country's integrity.

Source: Agencies