Pro-Russian separatists have seized government buildings in Ukraine's eastern region and clashes have erupted alongside street protests by supporters of both sides in the dispute.
Kiev's Western-backed government has accused Russia's President Vladimir Putin of fomenting the unrest, but admits its forces are powerless to halt the expanding rebellion.
Moscow in turn has called on Kiev to halt its "anti-terrorist" operation and to withdraw security forces from the region. Ukraine responded by reintroducing conscription to beef up its out-matched army.
"That was a rather remarkable statement by a senior Russian government official... Who called on Ukraine to remove its forces from its country, which is preposterous, if you think about it," he said.
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Merkel is to meet Obama in Washington tomorrow, with Ukraine at the top of their agenda. Carney brushed off reports of differences between Europe and the United States on how to handle the crisis.
Europe has closer trade ties with Russia than does the United States, and EU leaders reportedly fear that harsh sanctions could drive up energy costs in their already weak economies.