Ukrainian soldiers and pro-Russian rebels fought fierce battles yesterday around a flashpoint town, with only a small reprieve to allow passage of a freed team of OSCE inspectors.
More than 50 people have died in two days of clashes nationwide - most of them in a horrific inferno amid street clashes in the southern city of Odessa.
In the east, the military stepped up its assault on rebels in the flashpoint town of Slavyansk yesterday.
The bloodshed was plunging the international crisis over the ex-Soviet republic into dangerous new territory.
Russia said it would now be "absurd" for the country - whose Crimea peninsula it annexed in March - to hold a planned May 25 presidential election.
That opened the risk of sweeping US sanctions designed to target whole sectors of the Russian economy after President Barack Obama warned of punishment if perceived Moscow meddling scuppered the poll.
US Secretary of State John Kerry underlined that threat in a call to his Russian counterpart, saying: "If those supported by Russia continue to interfere with the election, regrettably there will have to be different sanctions including the possibility or the reality of sectoral sanctions."
In his call to Foreign Minister Sergey Lavrov, Kerry urged Moscow to do more and "withdraw support for the separatists."
The Russian foreign minister responded by calling on "the United States to use all of its influence to force the Kiev regime ... to immediately halt military operations".
On the ground, however, there was no sign of combat subsiding.
At least nine people have died in clashes around Slavyansk. On Friday, the military tightened its noose on the area but lost two helicopter gunships to shoulder-launched missiles.
The OSCE inspectors, who had been detained in Slavyansk for over a week, were freed shortly after a Kremlin envoy arrived in east Ukraine to speak with the rebels holding them.
"It is happiness, a deep relief" to be free, their leader, German Colonel Axel Schneider, told a small group of journalists just after leaving the town.