Russia warned Europe Thursday its gas supplies would be in peril unless it helped pay Ukrainian debts, while the US threatened Moscow with more sanctions in a further escalation of the crisis over Ukraine.
Russia's President Vladimir Putin attends a meeting with his envoys to the Federal Districts in the Novo-Ogaryovo state residence outside Moscow on April 9, 2014
President Vladimir Putin's most direct warning about Russian gas deliveries -- vital to the health of the European Union economy -- came as Ukraine faced a new secession crisis and relations between Moscow and the West plumbed new post-Cold War lows.
US Treasury Secretary Jacob Lew countered the threat to halt gas deliveries by telling Russian Finance Minister Anton Siluanov that Washington would hit Moscow with a new round of sanctions if it "continues to escalate" the situation in Ukraine.
Ukraine's embattled leaders, scrambling to hold their splintered country together after Russia's annexation of Crimea, offered amnesty Thursday to pro-Russian separatists occupying eastern state buildings if they laid down their arms and halted a four-day seige.
The war of words over the ex-Soviet country adds extra urgency to the first round of direct talks that EU and US diplomats have convinced both Russia and Ukraine to attend, set for April 17 in either Geneva or Vienna.
But Putin did not appear to be in a conciliatory mood as he dispatched a note to 18 EU nations warning that his energy-rich country was tired of accruing debts from the Western-backed leadership in Kiev, which the Kremlin does not recognise.
In a letter, he warned state gas firm Gazprom would be "compelled to switch over to advance payment for gas deliveries, and in the event of further violation of the conditions of payment, (to) completely or partially cease gas deliveries" if Ukraine failed to pay a $2.2-billion (1.6-billion-euro) debt.
Putin added that "Russia is prepared to participate in the effort to stabilise and restore Ukraine's economy" but only on "equal terms" with the EU.
State Department spokeswoman Jen Psaki condemned "Russia's efforts to use energy as a tool of coercion" and said the US was working with Ukraine to provide financing and help it find enough gas.
Ukraine last week accused Russia of "economic aggression" after Gazprom raised the price of Ukrainian gas by 81 percent, to the highest of any of its European clients.
About 13 percent of the gas consumed by the EU's 28 countries transits through Ukraine, which was hit by two previous supply interruptions in 2006 and 2009 that also came during efforts to build closer EU ties.
- 'Real threat to Ukraine' -
The threat of a Russian gas cutoff is a worry for Europe and a longer-term problem for cash-strapped Ukraine's new leaders.
But the team that toppled Kremlin-backed president Viktor Yanukovych in February is more immediately anxious about regions where the ousted leader held sway breaking away to join Russia.
Armed assailants who stormed the state security building in Lugansk and the seat of government in nearby Donetsk want to hold independence referendums like the one that led to Crimea's annexation by Russia last month.
Ukraine's interior minister set a Friday morning deadline for the separatists to end their seige or face a possible crackdown.
Acting President Oleksandr Turchynov tried to stave off bloody confrontation by offering an amnesty to everyone who voluntarily gave up to the police.
"We can solve this problem today," Turchynov told lawmakers.
The two building occupations have drawn only small rallies of supporters and some polls show the region's majority would actually prefer not to join Russia.
But there were few signs the fighters were willing to cede ground.
The Donetsk separatists earlier proclaimed the creation of their own "people's republic" and called on Putin to order Russian troops into Ukraine's eastern industrial heartland.
NATO Thursday released a score of satellite pictures showing that up to 40,000 Russian troops armed with tanks and military vehicles have set up camp just east of Ukraine's border.
"This force is very capable, ready to move quickly if ordered. It's a concern because it represents a real threat for Ukraine," said Brigadier Gary Deakin, director of NATO's Comprehensive Crisis Operations and Management Center.
Ukraine also accused Russian troops of laying anti-personnel landmines at entry points along the edge of the Crimean peninsula and seizing a Ukrainian stockpile of landmines used for training.
Donetsk's separatists on Thursday too were digging in, fortifying their barricades with razor wire and old tyres that could be set on fire in case of a police assault.
Someone had painted "Russia" on the side of the imposing building, while a small group of elderly people handed out fliers in the drizzling rain claiming "Nazis are in power" in Kiev.
"We do not need an amnesty -- we need freedom," said 40-year-old Katerina, standing next to the barricades. "They want to kill us."
- Football boss joins talks -
The negotiations in Donetsk -- a blue-collar coal mining region where Yanukovych once served as governor -- have involved some of Ukraine's most powerful security officers and its richest tycoon.
Officials said businessman and Shakhtar football club owner Rinat Akhmetov and the region's governor have both joined Kiev's efforts to tone down the militants' demands.
Akhmetov -- his wealth estimated by Forbes magazine at $11.4 billion -- was a key financial backer of Yanukovych and still wields tremendous influence throughout Donetsk.
But the magnate is believed to be trying to establish closer relations with the new pro-Western leaders who are likely to prevail in snap May 25 presidential polls.