The United States and Europe have prepared fresh sanctions on Russia they could activate as soon as tomorrow over the crisis in Ukraine, where tensions spiked as rebels detained an international team of military observers.
The Group of Seven top economies and the European Union signalled they would step up economic pressure on Moscow early next week amid fears Russia was preparing an invasion of eastern Ukraine.
Ukrainian Prime Minister Arseniy Yatsenyuk claimed Russia violated his country's airspace seven times overnight with an aim "to provoke" Ukraine into starting a war.
But Moscow denied any transgression by its warplanes.
Yatsenyuk cut short a visit to the Vatican as concern grew that the tens of thousands of Russian troops conducting military drills on the border could soon be ordered to invade.
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 were underway to secure the release of a 13-member mission from the Organisation for Security and Cooperation in Europe 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.
As indignant Western powers demanded their immediate release, Russia's envoy to the OSCE said Moscow would "take all possible steps in this case".
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 take the heat out of the crisis in the ex-Soviet republic.
As the West and Russia traded barbs, the G7 group agreed on the need for further sanctions on the government of President Vladimir Putin, joint statement of the group said.
"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.
US officials said the next round would target "individuals with influence on the Russian economy, such as energy and banking" and could be bolstered if the situation escalated.
EU sources in Brussels said senior diplomats from the 28-member European bloc would also hold talks tomorrow to consider new sanctions.
While President Barack Obama has ruled out sending US or Nato forces into Ukraine, 600 US troops have landed in Lithuania to bolster Nato's defences.