NATO meanwhile said it had seen no sign of any major Russian pullback from the Ukrainian border despite Putin saying earlier this week nearly 18,000 troops had been withdrawn from the frontier.
US and European Union leaders had welcomed that announcement as a positive gesture ahead of the Poroshenko talks but also reminded Putin that sanctions would remain in place until he stopped meddling in Ukraine completely.
Merkel said it was "first and foremost" Russia's responsibility to make sure a tenuous ceasefire and peace plan agreed last month with pro-Moscow rebels "really will be implemented."
Putin is due to meet Poroshenko early Friday, with Merkel, French President Francois Hollande, British Premier David Cameron and Italian leader Matteo Renzi all sitting in.
"We will be searching for dialogue here," Merkel said as she arrived for the ASEM summit.
The meeting was always expected to be difficult and the latest exchanges appear to make that more likely.
Stressing that he would not be blackmailed by the West over Ukraine, Putin chillingly warned of "what discord between large nuclear powers can do to strategic stability."
The Russian president was also expected to hold separate talks with Merkel, notably on ensuring "uninterrupted gas supplies for Europe," Putin's top foreign policy advisor Yury Ushakov said.
Russia cut gas shipments to Ukraine in June, threatening widespread disruption to supplies in Europe as winter approaches.
Warming to the theme, Putin today said Europe faced "major transit risks" unless Ukraine settled its dispute with Moscow.