President Vladimir Putin threatened that US sanctions against Moscow could harm Western energy interests in Russia, which the West blames for stoking the worst confrontation since the end of the Cold War.
US Secretary of State John Kerry hit back, urging Moscow to "leave Ukraine in peace" and vowing to "defend every single inch" of NATO territory. Ukraine is not a member of the North Atlantic Treaty Organization, but several of its neighbors are.
Meanwhile, unrest in the eastern regions of the ex-Soviet republic continued to seethe as pro-Russia rebels, spearheaded by a heavily armed mob, took control of the police station in Lugansk after a stand-off with tear gas and shots fired.
Police had tried to hold off an angry mob of some 1,000 demonstrators with grenades and tear gas but eventually turned over their headquarters and weapons to the rebels.
Ukraine's interim president Oleksandr Turchynov lashed out at what he called the "inaction" and in some cases "treachery" of the police services in the east.
Lugansk is one of more than a dozen towns in the east of the country that have fallen under the control of the rebels, who do not recognize what they see as the "fascist" Western-backed authorities in Kiev.
Speaking at a regional summit in Minsk late Tuesday, Putin reiterated his denial that Moscow's troops were involved in the violence in eastern Ukraine.
"There are neither Russian instructors, nor special units, nor troops there," said Putin.
And he hit back at Western sanctions against Russia, unveiled on Monday, warning that foreign companies operating in the lucrative Russian energy market could suffer as a result.
"If this continues, we will of course have to think about how (foreign companies) work in the Russian Federation, including in key sectors of the Russian economy such as energy," Putin told reporters.
Putin's comments threaten the operations of some of the world's biggest energy companies in the resource-rich state -- once viewed as a reliable alternative to unstable natural gas and oil producing countries in the Middle East.
Among those targeted by the US sanctions is the president of Rosneft, Russia's top petroleum company and one of the world's largest publicly traded oil companies.
The EU said talks with Russia and Ukraine will take place in Warsaw on Friday to try to resolve a $3.5-billion gas bill Gazprom calculates Kiev owes. Putin has threatened to cut off the gas flow to Ukraine if it is not quickly paid.
Russian officials have accused the United States of wanting to reinstitute "Iron Curtain"-style policies with the sanctions and warned they could "boomerang" back to hurt them.
US moves to restrict high-tech exports to Russia appeared to cause particular fury, with Moscow warning Washington was "exposing their astronauts on the ISS".
The International Space Station is operated jointly by Russia, the United States, Europe, Japan and Canada and relies on Russian rockets to get to it.
Moscow has also taken aim at Japan and the European Union, which it accused of "doing Washington's bidding" as it joined in the coordinated sanctions push.
BA/BA