(Adds Cameron quotes)
LONDON, July 21 (Reuters) - British Prime Minister David Cameron on Monday questioned France's plan to sell Mistral helicopter carriers to Russia, saying fulfilling such an order would be unthinkable in Britain after the downing of the Malaysian Airlines plane in Ukraine.
When asked about France's plan to press ahead with a 1.2 billion-euro ($1.66 billion) contract to sell the ships to Russia, Cameron said: "Frankly in this country it would be unthinkable to fulfil an order like the one outstanding that the French have.
"But we need to put the pressure on with all our partners to say that we cannot go on doing business as usual with a country when it is behaving in this way."
Cameron spoke as fighting flared in the eastern Ukrainian city of Donetsk as investigators began to inspect the bodies of victims of the downing of Malaysia Airlines flight MH17 last week.
The British leader said that the European Union should consider hard-hitting economic sanctions against Russia, including freezing the assets of President Vladimir Putin's closest allies whom he referred to as "cronies and oligarchs".
"I made some progress with that on Wednesday night, I hope to make some more progress (at an EU meeting on Tuesday), but I think it is time to start go into the tier three sanctions," he said, saying Russia couldn't expect access to European markets, capital and technical expertise while Putin was fuelling conflict in Ukraine. (Reporting by Kylie MacLellan and William James; Writing by Guy Faulconbridge; Editing by Andrew Osborn)