(Reuters) - The G20 leaders summit in Australia starting on Saturday is setting up as a showdown between Western leaders and Russian President Vladimir Putin, following fresh reports of Russian troops pouring into eastern Ukraine.

Ukraine accused Russia on Thursday of sending soldiers and weapons to help separatist rebels in eastern Ukraine launch a new offensive in a conflict that has killed more than 4,000 people.

British Prime Minister David Cameron blasted Russia's actions as unacceptable on Friday, warning that they could draw greater sanctions from the United States and the European Union.

"I would still hope that the Russians will see sense and recognize that they should allow Ukraine to develop as an independent and free country, free to make its choices," Cameron told reporters in Canberra.

"If Russia takes a positive approach towards Ukraine's freedom and responsibility, we could see those sanctions removed, if Russia continues to make matters worse then we could see those sanctions increased, it's as simple as that."

The G20 leaders summit in Brisbane is focused on boosting world growth, fireproofing the global banking system and closing tax loopholes for giant multinationals.

But with much of the economic agenda agreed and a breakthrough climate change deal signed last week in Beijing between the United States and China, security concerns are moving to centre-stage.

Russia denies sending troops and tanks into Ukraine.

But increasing violence, truce violations and reports of unmarked armed convoys travelling from the direction of the Russian border have aroused fears that a shaky Sept. 5 truce could collapse.

Ukraine has not been a top focus during a pair of summits in Asia this past week, U.S. Deputy National Security Advisor Ben Rhodes said, although Obama did raise it briefly with Putin when both attended the Asia Pacific Economic Cooperation forum in China.

In Brisbane, Obama will be discussing his frustration over Ukraine with a key bloc including German Chancellor Angela Merkel, French President Francois Hollande and Cameron.

"They've been key towards sending a shared message to the Russians and the Ukrainian government," Rhodes told reporters. "So it will be an opportunity for him to check in with them."


There had been calls from some in Australia to block Putin from attending the summit given Russia's actions in Ukraine and the downing of Malaysia Airlines Flight MH17 by Russian-backed rebels, but the overwhelming consensus was against it.

Australia said this week that it was monitoring a deployment of Russian warships that was north of its waters.

"We're seeing, regrettably, a great deal of Russian assertiveness right now in Ukraine. So, it’s not really surprising," Australian Prime Minister Tony Abbott said.

In addition to Ukraine, the crises in the Middle East are threatening to overshadow the economic agenda.

British nationals who become foreign fighters abroad could be prevented from returning home under new laws to deal with jihadists fighting in conflicts like Iraq and Syria, Cameron said in an address to the Australian parliament on Friday.

As host, Australia will continue pushing its growth agenda despite growing security tensions.

"The focus of this G20 will be on growth and jobs," Abbott said at a press conference with Cameron. "You can't have prosperity without security."

Canberra is pushing for an increase in global growth targets of 2 percent by 2018 to create millions of jobs and that goal appears on track. Over 1,000 policy initiatives proposed by G20 nations should add around 2.1 percent, the head of the Paris-based Organisation for Economic Co-operation and Development (OECD) said.

Taxation arrangements of global companies such as Google Inc, Apple Inc and Amazon.com Inc have become a hot political topic following media and parliamentary investigations into how many companies reduce their tax bills.

The OECD has unveiled a series of measures that could stop companies from employing many commonly used practices to shift profits into low-tax centers.

Australian Treasurer Joe Hockey said Australia had won U.S. cooperation to launch an "aggressive crackdown" on tax avoidance.

"I believe we have got the United States signed up," he said on Australian Broadcasting Corp radio. "They were cautious at first but obviously the United States itself has been missing out on revenue from a number of these large multinationals."