KOSTYANTYNIVKA, Ukraine (AFP) - Moscow has assured Washington it will not invade Ukraine, the United States Defense Department said, after the United States and Europe imposed fresh sanctions on Russia over its role in the former Soviet republic.

As Western powers stepped up the pressure on Moscow over the worst East-West crisis since the Cold War, the White House on Monday slapped sanctions on seven Russian officials and 17 companies close to President Vladimir Putin.

The European Union said it was adding 15 names to its own list while Canada added nine names and two banks.

Tensions on the ground in Ukraine spiked when a pro-Moscow mayor was shot and badly wounded and rebels seized another town.

The Pentagon said that US Secretary of Defence Chuck Hagel had spoken by phone with his Russian counterpart Sergei Shoigu and that "Shoigu reiterated his assurance that Russian forces would not invade Ukraine".

Defence Department spokesman John Kirby, in a statement, said the two men discussed a range of issues related to the situation in Ukraine, with Mr Hagel requesting clarification of Russia's intentions in eastern Ukraine.

Mr Hagel urged an end to Russia's "destabilising influence inside Ukraine and warned that continued aggression would further isolate Russia and result in more diplomatic and economic pressure," Read-Adm Kirby said.

The Pentagon chief also asked for Moscow's help in securing the release of seven inspectors from the Organisation for Security and Cooperation in Europe being held in eastern Ukraine.

Moscow said that, during the phone call with Mr Hagel, Mr Shoigu called on the United States to tone down its rhetoric on the Ukraine crisis.

The Kremlin vowed there would be a "painful" response for Washington to the sanctions imposed.

Russian Deputy Foreign Minister Sergei Ryabkov told the Interfax news agency that Moscow was "disgusted" by the US action, which he said showed Washington had "completely lost touch with reality".

The United States said it was prepared to "impose still greater costs" on Russia for what it called its "illegal intervention and provocative actions" in Ukraine.

Washington warned it would target specific sectors of the Russian economy if the tens of thousands of troops the Kremlin has ordered to the border invade Ukraine.

Western powers have expressed fears that Russia could be planning an invasion of eastern Ukraine.

Earlier this month Nato released satellite pictures of up to 40,000 Russian troops massed along the Ukraine border that it said were ready for action and represented a "real threat" to Kiev.

Mr Shoigu assured Mr Hagel that Russian troops had returned to their barracks.

"Russia was forced to launch large-scale exercises near the border with Ukraine, facing the prospect of (Ukrainian) military action against civilians," Mr Shoigu said, according to a Russian Defence Ministry statement.

"Once the Ukrainian authorities declared that they would not use regular military units against the unarmed population, the Russian troops returned to barracks."

Among those targeted by the new sanctions are close Putin ally Igor Sechin, president and chairman of the board at Rosneft, Russia's top petroleum company and one of the world's largest publicly traded oil companies.

Washington is also tightening licensing requirements for certain high-tech exports to Russia that could have a military use.

The Western sanctions are a response to Russia's perceived failure to implement an April 17 deal struck in Geneva to defuse the crisis.

British Foreign Secretary William Hague, who plans to visit Ukraine as well as Moldova and Georgia next week, put the blame for the faltering Geneva deal squarely on the Kremlin.

"Russia has so far failed to implement any part of the Geneva agreement," said Mr Hague.

Ukraine's army is waging an offensive to quell the separatist movement in the eastern part of the country which the West believes is fomented and controlled by the Kremlin.

Kiev's soldiers are surrounding the flashpoint town of Slavyansk in a bid to prevent reinforcements reaching militants there.

United Nations chief Ban Ki Moon on Monday appealed to all sides to defuse the situation in Ukraine and restore "the spirit of compromise" shown at the Geneva talks.

But tensions in eastern Ukraine showed little sign of easing.

Pro-Moscow mayor Gennady Kernes, from the town of Kharkiv, was shot in the back on Monday and remained in critical condition following surgery.

The identity and motive of the gunman who targeted him while he was riding his bicycle were unknown.

Kalashnikov-toting militants seized the town hall of Kostyantynivka - the latest of more than a dozen towns held by pro-Russian insurgents who were supposed to have disarmed under the Geneva deal.

Several people were wounded in Donetsk when pro-Russian militants wielding baseball bats and iron bars attacked a rally supporting the Western-backed authorities in Kiev, an AFP reporter on the scene said.

Earlier in Donetsk, about 300 masked men also using bats attacked a bank owned by a billionaire oligarch and regional governor who has clashed with Putin.

Negotiations were still under way to secure the release of the seven remaining international observers from the OSCE, whose capture by rebels on Friday sparked global outrage.

The pan-European security organisation held an emergency meeting in Vienna to discuss the rising threat in Ukraine to monitors overseeing the faltering Geneva accord.

However the OSCE envoy from Russia, which blames Kiev for the detentions, said it was "extremely irresponsible" to send them to Slavyansk.

The self-styled mayor of Slavyansk, Vyacheslav Ponomaryov, said the rebels had given the OSCE negotiators a list of names of detained pro-Russian militants they would accept as part of a prisoner swap.

Chief among these was Mr Pavel Gubarev, the self-proclaimed "people's governor" of Donetsk.

The crisis has escalated at breathtaking pace since November when pro-Western protesters in Kiev began mass demonstrations against Kremlin-backed then President Viktor Yanukovych after he rejected an agreement to bring Ukraine closer to the European Union.

After four months of protests, which turned deadly as authorities tried to break them up, Mr Yanukovych was forced from power.

In response, Moscow launched a blitz annexation of the peninsula of Crimea and stepped up troop movements on the border.