Moscow must show it is serious about a de-escalation in Ukraine by pledging concrete steps to ease tensions in four-way talks scheduled for Thursday in Geneva, German Economy Minister Sigmar Gabriel has said.
“These talks are long overdue ... We expect that Russia will take serious and publicly visible steps in these talks towards de-escalation. It‘s in Russia’s hands to prevent a further escalation that would be linked to economic sanctions,“ Mr Gabriel told reporters.
“If Russia is not ready to make sure the escalation finally ends, it must expect that Europe and Germany will be ready to start the third phase of sanctions.“
Meanwhile, Kiev’s ambassador to the United Nations in Geneva said unrest in eastern Ukraine is a “concocted pretext” provoked by Russia that aims to disrupt the four-way talks.
Yurii Klymenko said Ukraine wanted to use the talks, which will bring together US, European Union, Russian and Ukrainian diplomats, to reduce tensions on its borders with Russia and to help revive trade with Russia. But Ukraine would not discuss its internal affairs, he said.
Pro-Russian separatists yesterday ignored an ultimatum to leave occupied government buildings in eastern Ukraine and instead seized more buildings as the government failed to follow through on a threatened military crackdown.
US president Barack Obama criticised Russia in a telephone conversation with Russian counterpart Vladimir Putin last night, saying Moscow's actions in Ukraine were not conducive to a diplomatic solution.
The Kremlin said it had requested the call. The White House said the call was frank and direct.
“President Putin called on Barack Obama to do his utmost to use the opportunities that the United States has to prevent the use of force, and bloodshed,” the Kremlin said in a statement.
The White House said Mr Obama urged Russia to use its influence to get separatists in the country to stand down.
“The president emphasised that all irregular forces in the country need to lay down their arms, and he urged President Putin to use his influence with these armed, pro-Russian groups to convince them to depart the buildings they have seized,” the White House said in a statement.
Pro-Russian rebels have seized buildings in around 10 other towns and cities across other eastern provinces that form the heartland of Ukraine’s heavy industry.
In the town of Slaviansk, where the authorities failed to follow through with their announced “anti-terrorist” operation, rebels called for Mr Putin’s help.
The Kremlin said the Russian president was listening.
"Unfortunately, there's a great many such appeals coming from the eastern Ukrainian regions addressed directly to Putin to intervene in this or that form," spokesman Dmitry Peskov said. "The president is watching the developments in Eastern Ukraine with great concern."
The Ukraine crisis, and in particular the annexation of Crimea by Russia last month, have led to the most strained relations between Moscow and the West since the Cold War.
The White House has warned Russia it would face further costs over its actions in Ukraine, but it made clear earlier yesterday that the United States was not considering lethal aid for Ukraine.
European foreign ministers agreed to step up sanctions, and US officials have said they were consulting European partners on how to punish Moscow for what Kiev and its Western allies say is a Russian plot to break up Ukraine.
Moscow has largely brushed off sanctions so far, which the United States and Europe have explicitly designed to target only a limited number of officials and avert wider economic harm.
Ukraine's interim president, Oleksander Turchinov, said yesterday the offensive against the rebels would still go ahead. But in a sign of discord behind the scenes in Kiev, he sacked the state security chief in charge of the operation.
In one of the first signs of a military deployment by Kiev's forces, a Ukrainian column of two tanks and more than 20 armoured personnel carriers packed with paratroops was seen about 70 km (50 miles) northwest of Slaviansk last night, according to video journalist Maksim Dondyuk who filmed them.
In Donetsk, rebels who have taken over the administrative headquarters of a province that is home to 10 percent of Ukraine’s population said they planned to seize control of infrastructure and the levers of state power. They have declared an independent “People’s Republic of Donetsk” and sought Mr Putin’s protection if they are attacked.
In a bid to undercut the rebels’ demands, Mr Turchinov held out the prospect of a countrywide referendum on the future shape of the Ukrainian state. Pro-Russian secessionists want separate referendums in their regions, which Kiev says is illegal.
The uprising in eastern Ukraine began eight days ago but has accelerated sharply in the past 48 hours, with separatists seizing ever more buildings, including arsenals filled with weapons. They have met little opposition.
Kiev says the separatists are organised by Moscow, seeking to repeat the seizure of the Crimea region.
Russia says the armed men are all locals acting on their own, but Western officials say the uprising is too well-coordinated to be entirely spontaneous, and bears too many similarities to the Russian operation in Crimea.
Moscow says it has the right to intervene to protect Russian speakers in Ukraine, and has portrayed the people of the east as under threat from gangs of Ukrainian-speaking “fascists”.
Nato says Russia has tens of thousands of troops massed on the frontier, able to capture eastern Ukraine within days.
"I don't think denials of Russian involvement have a shred of credibility," British foreign minister William Hague said, before a meeting with EU counterparts.
Mr Hague later announced that the ministers had agreed to expand a list of Russians barred from travelling or doing business in the EU. Work would begin to come up with new names for the sanctions list, Hague said.
Russian stocks and the rouble fell sharply on Monday, reflecting fears of further Russian military intervention in Ukraine and more western sanctions against Moscow.
Kiev is also facing economic disarray. The central bank nearly doubled its overnight interest rate to 14.50 percent from 7.50 percent. Ukraine’s hryvnia currency has lost 38 percent of its value against the dollar this year.
Mr Turchinov had threatened to launch a military crackdown by 9am, but as the deadline expired there was no sign of any action in Slaviansk.
Russia’s foreign ministry called Mr Turchinov’s planned military operation a “criminal order” and said the West should bring its allies in Ukraine’s government under control.
Mr Turchinov’s website said he told UN secretary-general Ban Ki-moon he would welcome UN peacekeepers in Ukraine. The proposal was rhetorical as no such deployment has been proposed or could ever take place over Russia’s Security Council veto.
Mr Turchinov's announcement he was sending in the army was the first time the military has been activated in six months of internal disorder. The plan implies a lack of confidence in the 30,000-strong interior ministry troops, partly discredited by identification with ousted president Viktor Yanukovich.
In Slaviansk, about 150 km (90 miles) from the Russian border, a small airfield that was occupied by Ukrainian air force planes on Sunday was empty on Monday and pro-separatist forces said they were now in control of it.
Eastern Ukraine seems to be rapidly spinning out of the control of the central government. The governor of Donetsk, a multi-millionaire appointed by Kiev, has not been seen since April 11th. A man calling himself Donetsk’s new police chief has appeared wearing the orange and black separatist ribbon.
The Ukrainian defence ministry acknowledged that it has had difficulty mobilising the armed forces in the east, where some units have been blockaded in by rebellious locals.
"On some occasions we have lost the information war and there have been blockades of our units. People don't understand why they are coming," said acting Defence Minister Mykhailo Koval.
Outside the Slaviansk city council offices stood a group of about 12 armed men in matching camouflage fatigues with black masks, one of whom was holding a Russian flag.
They said they were Cossacks - paramilitary fighters descended from Tsarist-era patrolmen - but did not say from where. One told Reuters: “The borders between Ukraine, Russia and Belarus are artificial and we are here to take them away.”