As the West sought to ratchet up the diplomatic and economic pressure on the Kremlin, the situation on the ground in eastern Ukraine threatened to escalate, with pro-Russian rebels kidnapping a team of international observers and accusing them of being Nato spies.
As well, Ukrainian Prime Minister Arseniy Yatsenyuk said Russia had violated his country's airspace seven times overnight with an aim "to provoke Ukraine to start a war".
Moscow denied any transgression by its warplanes.
Yatsenyuk cut short a visit to Vatican City as fears grew that the tens of thousands of Russian troops conducting military drills on the border could soon start an invasion.
A Western diplomat warned: "We no longer exclude a Russian military intervention in Ukraine in the coming days."
The diplomatic source noted that Russia's UN envoy, Vitaly Churkin, "has been recalled urgently to Moscow" for consultations.
Meanwhile, international efforts continued to secure the release of a 13-member mission from the Organisation for Security and Cooperation in Europe (OSCE) held hostage by pro-Russian militants in the flashpoint city of Slavyansk.
The chief of the insurgents' self-styled "Republic of Donetsk", Denis Pushilin, accused them of being "Nato spies" and said they would only be released in a prisoner swap for militants detained by Ukrainian forces.
An AFP journalist in Slavyansk said rebels had fortified the barricades around the security services building where they were being held with sandbags and a machine-gun.
As indignant Western powers demanded their immediate release, Russia's envoy to the OSCE said Moscow would "take all possible steps in this case".
"We believe that these people should be released as soon as possible," Andrei Kelin said.
Russian's foreign ministry also said Moscow was "taking measures" to resolve the situation but blamed the Ukrainian authorities for the hostage crisis.
The OSCE observers were sent to Ukraine to monitor an April 17 accord signed in Geneva between Russia, Ukraine, the United States and the European Union that was meant to de-escalate the crisis in the former Soviet republic.
"They were invited by the Ukrainian authorities" and their safety "rests fully with the receiving side," the foreign ministry in Moscow said.
Speaking to reporters in Rome, Yatsenyuk said the detention was "unbelievable and unacceptable".
"This is another proof and evidence that these so-called peaceful protesters with Russian ideas are terrorists," he said.
Ukraine's own secret services said one of those detained "urgently" needed medical help.The hostages were being held in "inhuman conditions" and were likely to be used as "a human shield effectively terrorising the whole international community," said the Kiev authorities.
As the West and Russia traded barbs amid the worst crisis in relations since the end of the Cold War, the Group of Seven rich countries agreed on the need for further sanctions on the government of President Vladimir Putin.
In a joint statement, the G7, consisting of the United States, Britain, France, Japan, Canada, Germany and Italy, said it would "move swiftly to impose additional sanctions on Russia".
"These sanctions will be coordinated and complementary, but not necessarily identical. US sanctions could come as early as Monday," a senior US administration official said.
The United States and the European Union have already targeted Putin's inner circle with visa and asset freezes and imposed sanctions on a key Russian bank.
A senior White House official said the next round could target "individuals with influence on the Russian economy, such as energy and banking".
EU sources in Brussels said senior diplomats from the 28-member European bloc would also hold talks Monday to consider new sanctions.
The crisis erupted after Russia refused to accept the legitimacy of Kiev's new pro-EU government, which came to power after four months of street protests forced the ouster of the Kremlin-backed president, Viktor Yanukovych.
Last month, Moscow annexed Ukraine's peninsula of Crimea after deploying troops, sparking international outrage.