© GettyBarack Obama
International tensions were mounting Saturday over the situation in the ex-Soviet republic, where sporadic fighting between pro-Kremlin rebels and Ukrainian security forces flared this week.
Russian warplanes violated Ukraine's airspace several times on Thursday and Friday, the Pentagon said.
Russia has also begun new drills on the border, where it has tens of thousands of troops massed.
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, had been recalled to Moscow for urgent consultations.
On the ground in east Ukraine, Kiev's Western-backed government is waging an offensive against pro-Moscow rebels holding a string of towns.
A 13-member team of observers from the Organisation for Security and Cooperation in Europe (OSCE), sent into Ukraine to monitor an April 17 Geneva accord designed to de-escalate tensions, was being held hostage by rebels in the flashpoint town 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.
A barricade around the building where the OSCE team was being held had been greatly fortified with sandbags and a machine-gun.
Washington and Europe called for the immediate release of the OSCE team, which includes members from Germany, Sweden, Denmark, Poland, the Czech Republic and Bulgaria.
German Foreign Minister Frank-Walter Steinmeier has urged his Russian counterpart, Sergei Lavrov, to intervene to have the team freed, officials in Berlin said.
Russia responded it would do everything in its power to win their release.
Kiev has accused Moscow - which it sees as controlling the rebels - of seeking to trigger a "third world war" and urged Russian troops to withdraw from the border.
Russia in turn has warned it has a "right" to invade to protect Ukraine's Russian-speaking population concentrated in the east and southeast, sparking the worst East-West confrontation since the Cold War.
The G7 nations said in a joint statement they 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 Group of Seven consists of the United States, Britain, Canada, France, Germany, Italy and Japan. European Union foreign ministers are also to meet soon to discuss the issue.
The US and the EU have already targeted Russian President Vladimir 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 of sanctions could target "individuals with influence on the Russian economy, such as energy and banking".
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