As Western powers stepped up the pressure on Moscow over the worst East-West crisis since the Cold War, the White House on Monday slapped sanctions on seven Russian officials and 17 firms close to President Vladimir Putin.

The European Union said it was adding 15 names to its own list while Canada added nine names and two banks.

Tensions on the ground in Ukraine spiked when a pro-Moscow mayor was shot and badly wounded and rebels seized another town.

The Pentagon said that Secretary of Defence Chuck Hagel had spoken by phone with his Russian counterpart Sergei Shoigu and that “Shoigu reiterated his assurance that Russian forces would not invade Ukraine”.

Defence Department spokesman Rear Admiral John Kirby, in a statement, said Hagel urged an end to Russia’s “destabilising influence inside Ukraine and warned that continued aggression would further isolate Russia and result in more diplomatic and economic pressure”.

The Pentagon chief also asked for Moscow’s help in securing the release of seven inspectors from the Organisation for Security and Cooperation in Europe being held in eastern Ukraine.

Negotiations were still under way to secure the release of the observers, whose capture by rebels on Friday sparked global outrage.

Moscow said that in Monday’s phone call Shoigu called on the US to tone down its rhetoric on the Ukraine crisis.

The Kremlin vowed there would be a “painful” response for Washington to the sanctions imposed.

Washington warned it would target specific sectors of the Russian economy if the tens of thousands of troops the Kremlin has ordered to the border invade Ukraine.

Shoigu assured Hagel that Russian troops had returned to their barracks.

“Russia was forced to launch large-scale exercises near the border with Ukraine, facing the prospect of (Ukrainian) military action against civilians,” Shoigu said.

“Once the Ukrainian authorities declared that they would not use regular military units against the unarmed population, the Russian troops returned to barracks.”

Among those targeted by the new sanctions are close Putin ally Igor Sechin, president and chairman of the board at Rosneft, Russia’s top petroleum company and one of the world’s largest publicly traded oil companies.

Washington is also tightening licensing requirements for certain high-tech exports to Russia that could have a military use.

The Western sanctions are a response to Russia’s perceived failure to implement an April 17 deal struck in Geneva to defuse the crisis.

Ukraine’s army is waging an offensive to quell the separatist movement in the eastern part of the country which the West believes is fomented and controlled by the Kremlin.

Kiev’s soldiers are surrounding the flashpoint town of Slavyansk in a bid to prevent reinforcements reaching militants there.

Pro-Moscow mayor Gennady Kernes, from the town of Kharkiv, was shot in the back on Monday and remained in critical condition following surgery.

The identity and motive of the gunman who targeted him while he was riding his bicycle were unknown.

Kalashnikov-toting militants seized the town hall of Kostyantynivka – the latest of more than a dozen towns held by pro-Russian insurgents.

Earlier in Donetsk, about 300 masked men using bats attacked a bank owned by a billionaire oligarch and regional governor who has clashed with Putin.