Ukraine's interior minister is warning that standoffs with pro-Russia demonstrators in three eastern regions must be resolved in the next 48 hours, either through negotiations or by force.
Arsen Avakov told reporters Wednesday that a "political solution" is still possible. But he vowed protesters who want conflict "will get a forceful response from Ukrainian authorities."
Pro-Moscow groups have seized several government buildings in eastern Ukraine and demanded a vote on joining Russia, in a dramatic escalation of the protests against the country's Western-friendly interim government.
Authorities say shots were fired and at least 60 protesters arrested in Kharkiv Tuesday, while demonstrators held on to government offices captured Sunday in Donetsk.
In Luhansk, Ukrainian authorities say more than 50 people were allowed to leave state security headquarters early Wednesday, where the pro-Russia activists were allegedly holding 60 hostages. Officials say the protesters have wired the building with explosives.
Kerry sees Russia's hand
U.S. Secretary of State John Kerry accuses Russian agents and special forces of stoking separatist unrest in eastern Ukraine.
He called the Russian actions "a contrived pretext for military intervention just as we saw in Crimea."
Kerry told a Senate committee Tuesday that Moscow's involvement in Ukraine "clear and unmistakable."
He said President Barack Obama is preparing more tough sanctions on Russia if it continues destabilizing Ukraine.
A buildup of troops along Russia's border with Ukraine has raised concerns that Moscow could move to take parts of eastern Ukraine, following its annexation of the largely ethnic Russian Crimean peninsula last month.
Moscow claims business as usual
Russia's Foreign Ministry on Wednesday said Moscow is not carrying out any "unusual or unplanned activity on its territory near the border with Ukraine that would be of military significance."
But few are convinced. German Chancellor Angela Merkel told lawmakers Russia has not taken sufficient steps to ease tensions. She urged an international observer mission in Ukraine be bolstered to include 500 people.
Ukraine's pro-Russian government was ousted in late February following weeks of anti-government protests. It was replaced by a Western-friendly government.
Ukraine plans to hold early presidential elections on May 25.
Russia faces capital flight
A surge in capital outflows from Russia underscores how international tensions over Ukraine are adding to the woes of Russia's already struggling economy.
Russia's central bank has published balance of payments data that showed an estimated $63.7 billion in net capital outflow in the first three months of this year - as much as the $63 billion in outflows seen during all of 2013.
The surge coincides with slumping investment and a sharp deterioration in business confidence, as forecasters slash economic growth forecasts after Russia's annexation of Crimea and warnings it could intervene further in Ukraine.
Economists say much of the outflow is being driven by companies and ordinary households, which have been rushing to convert their ruble savings into dollars.
Meanwhile, President Vladimir Putin said on Wednesday Russia should be prepared to spur domestic production to replace Ukrainian imports if Kyiv decides to impose trade restrictions.
Some reporting by Reuters