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At his first press conference since a pre-election break in Hawaii, Mr Key said the Government had called on the Russian President to show leadership.
"He now needs to stand up and tell the rebels to back off to ensure that there's access [to the crash site] and a full corridor of access, so that all information can be gathered.
"This is a time of enormous trauma and stress for the families involved and when we see reports of passports and other information being removed, that is simply adding to the stress," Mr Key said.
"Those families absolutely at the bare minimum deserve access to the black box, to all of the information and for all of those who are responsible to be held to account.
"International leadership is required - President Putin has to show that leadership and we are deeply concerned that a 24-hour organised ceasefire's failing to deliver the results - and we feel deeply for the New Zealanders involved."
Mr Key said he had spoken to Australian Prime Minister Tony Abbott and Malaysian Prime Minister Najib Razak about the tragedy and would be talking to Netherlands Prime Minister Mark Rutte later today.
"Together we have been very I think shocked, stunned and very saddened by what's taken place.
"I think, outside of all of this, it actually adds to the stress of international travellers generally, this is now a time where people will be concerned and that is now another worrying factor.
"The international community has to step up and it has to demand of President Putin - as the only person who can really make this happen - to ensure that those rebels back off and that a proper, thorough and full investigation can take place.
"We can't sit back in what is a totally unacceptable situation," Mr Key said.
"I think every international leader is now concerned by what they see...a commercial airline has been shot out of the sky, 298 people have lost their lives and we're now in the ridiculous situation where a proper investigation can't take place because the right people are not stepping up to the plate and doing something about it."
A free trade deal with Russia was now "the furthest thing from our mind", Mr Key said.
"At the end of the day what we are concerned about is justice for those families that lost a loved one."