DONETSK, Ukraine (AFP) - US President Barack Obama threatened fresh sanctions against Moscow if it escalates the crisis over Ukraine, as pro-Russia separatists faced a Friday deadline from Kiev to lay down their arms.
The president stressed that the United States, the European Union and other global partners must "be prepared to meet further Russian escalation with additional sanctions," the White House said in a statement, after Mr Obama and German Chancellor Angela Merkel spoke by phone on Thursday.
The United States also delivered the warning to Russia at World Bank/IMF meetings in Washington, amid worries that a spiralling Ukraine crisis could hurt the world economy.
Treasury Secretary Jacob Lew told his Russian counterpart Finance Minister Anton Siluanov that in addition to the sanctions that followed Russia's annexation of Crimea last month, "the United States is prepared to impose additional significant sanctions on Russia if it continues to escalate the situation in Ukraine," the Treasury said.
Ukraine's embattled leaders, scrambling to hold their splintered country together after the annexation of Crimea, on Thursday offered amnesty to pro-Russian separatists occupying eastern state buildings if they lay down their arms and halt a four-day siege.
The olive branch came as the clock ticked down to a Friday morning deadline set by Ukraine's Interior Minister Arsen Avakov to resolve the tense situation in the east.
Armed assailants who stormed the state security building in Lugansk and the seat of government in nearby Donetsk want to hold independence referendums like the one that led to Crimea's takeover by Russia last month.
Acting President Oleksandr Turchynov, in power since pro-Russian leader Viktor Yanukovych was ousted in February, told lawmakers that Ukraine's latest secessionist crisis could be resolved peacefully.
"If people lay down their arms and free the administration buildings... we guarantee that we will not launch any criminal proceedings against them," he promised.
But the separatists dug in on Thursday, fortifying their barricades with razor wire, sand bags and old tyres that could be set on fire in case of a police assault.
The Donetsk separatists earlier proclaimed the creation of their own "people's republic" and called on Mr Putin to order Russian troops into Ukraine's eastern industrial heartland.
In a further escalation of the crisis, Russia warned Europe on Thursday that its gas supplies would be in peril unless it helped to pay off Ukrainian debts.
President Vladimir Putin's most direct warning about Russian gas deliveries - vital to the health of the European economy - came as relations between Moscow and the West plumbed new post-Cold War lows.
The war of words over the ex-Soviet country adds extra urgency to the first round of direct talks that EU and US diplomats have convinced both Russia and Ukraine to attend, set for April 17 in either Geneva or Vienna.
But Mr Putin did not appear to be in a conciliatory mood as he dispatched a note to 18 EU nations warning that his energy-rich country was tired of accruing debts from the Western-backed leadership in Kiev, which the Kremlin does not recognise.
He warned state gas firm Gazprom could be "compelled to switch over to advance payment for gas deliveries" and "completely or partially cease gas deliveries" if Ukraine fails to pay a US$2.2-billion (S$2.75-billion) debt.
Mr Putin added that "Russia is prepared to participate in the effort to stabilise and restore Ukraine's economy" but only on "equal terms" with the EU.
State Department spokeswoman Jen Psaki condemned "Russia's efforts to use energy as a tool of coercion" and said the US was working with Ukraine to provide financing and help it find enough gas.
Ukraine last week accused Russia of "economic aggression" after Gazprom raised the price of gas exports to Ukraine by 81 percent, to the highest price paid by any of its European clients.
About 13 percent of the gas consumed by the EU's 28 countries transits through Ukraine, which was hit by two previous supply interruptions in 2006 and 2009 that also came during efforts to build closer EU ties.
On Thursday NATO released 19 satellite pictures showing that up to 40,000 Russian troops armed with tanks and military vehicles have set up camp just east of Ukraine's border.
"This force is very capable, ready to move quickly if ordered. It's a concern because it represents a real threat for Ukraine," said Brigadier Gary Deakin, director of NATO's Comprehensive Crisis Operations and Management Center.
Romania's foreign minister Titus Corlatean, in an interview with AFP, urged NATO to redeploy its forces in eastern Europe and take a firm stand to prevent a contagion of the Ukraine crisis.
Bucharest "is extremely concerned over developments in Ukraine which have a serious impact on international security," Corlatean said, stressing his country is "on the frontline".
Meanwhile World Bank President Jim Yong Kim warned that the crisis would have far-reaching effects on Russia, forcing it into recession this year.
"This is a very serious issue for Russia - a very serious issue for its growth prospects," Mr Kim told reporters. "So we simply urge all of the parties to continue with negotiations and find a peaceful means of moving forward."