Russian athlete Yelena Arzhakova won the race in Helsinki in 1min 58.51secs, beating Sharp - who was chasing an Olympic qualifying time.
But Arzhakova, 23, has been banned for two years for having an "abnormal haemoglobin profile" on her biological passport - and all her results from July 12, 2011 will be wiped from the books.
Scottish star Sharp, who will be a home medal hope when Glasgow host next summer's Commonwealth Games was defiant on Twitter.
She said: "Just woken up to the news I will be upgraded to European Champion from last year as a result of Arzhakova's ban # cleansport # drugcheatsout.
"It makes me sick that I was denied the opportunity to do a lap of honour and stand on the top of the podium with my national anthem playing."
Russian athletics - who host this summer's World Championships in Moscow - are veering into a drugs crisis.
As of today, 35 athletes from the country are serving drug bans.
Their top discus thrower Darya Pischalinkova is banned for a DECADE for a second drug offence.
The 27-year-old won silver in the London 2012 Olympics with a throw of 67.56m and will likely be stripped of her medal.
In March, British head coach Peter Eriksson called for an investigation into Russian athletics after the same happened to Wigan athlete Jenny Meadows, from the European Indoors in 2011, where she was beaten by Yevgenia Zinurova.
Eriksson said: "That's a bad number. They need to do work within the Russian system to find out what's going on. "
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