NATO announced a suspension of "all practical civilian and military cooperation" with Russia on Tuesday, condemning the country's "illegal" intervention in Ukraine as Moscow turned the financial screws on Kiev by hiking the cost of gas.
In a strongly worded statement, NATO foreign ministers meeting in Brussels said the Russian takeover of Crimea represented a "violation of Ukraine's sovereignty and territorial integrity." The military alliance also announced plans to bolster ties with other former Soviet states in eastern Europe.
The move came just hours after Russia sharply increased the price of natural gas to Ukraine, threatening to reclaim billions of dollars in previous discounts and raising the heat on Kiev's cash-strapped government.
State-controlled natural gas giant Gazprom said the company had set the price at $385.50 per 1,000 cubic meters for the second quarter, and withdrew December's discount that put the price of gas at $268.50 per 1,000 cubic meters, according to the company's Chief Executive Officer Alexei Miller.
That discount was part of a financial lifeline which Russian President Vladimir Putin offered to Ukraine's then-president, Viktor Yanukovich, after his decision to spurn a pact with the European Union in favor of closer ties with Moscow. That decision fueled three months of protests which led eventually to Yanukovich fleeing to Russia in February.
Miller said Tuesday that the decision to charge a higher price in the second quarter was made because Ukraine has failed to pay off its debt for past supplies, which now stands at $1.7 billion.
On Monday, Russian President Vladimir Putin announced a partial withdrawal of troops from his country's border with eastern Ukraine. Russia had amassed nearly 40,000 troops along Ukraine's border — a move that spurred fears that an invasion was imminent after Moscow annexed the Crimean peninsula earlier this year.
However, Putin and other officials have said that Russia has no intention of invading Ukraine. Russian Defense Minister Sergei Shoigu insisted Tuesday that the Kremlin wants a "political settlement that would take into account interests and rights of the entire Ukrainian people" and had no intention to threaten Ukraine's statehood.
In a separate development on Tuesday, the U.S. Congress sent a bill to President Obama's desk that would put additional sanctions on Russia for its Crimean annexation, as well as provide $1 billion in loan guarantees to cash-strapped Ukraine.
The bill would supplement sanctions the Obama administration has already taken by freezing assets and revoking visas of Russian officials and their associates who are complicit in or responsible for significant corruption in Ukraine, as well as target those who are responsible for human rights abuses against anti-government protesters and the undermining of the peace and sovereignty of Ukraine.
In Tuesday's statement, NATO foreign ministers said that NATO would intensify its cooperation with Ukraine, while calling on Russia "to return to compliance with international law and its international obligations and responsibilities."
Alliance members also noted no noticeable troop pullback by Moscow.
German Chancellor Angela Merkel told a news conference in Berlin on Tuesday that she could not confirm any withdrawal, adding that even if Putin had removed some troops "it is also certainly not the final step... the troop concentration on the Ukrainian border is very high."
"I think everybody realizes that the best way forward is a political and diplomatic dialogue," NATO Secretary General Anders Fogh Rasmussen said, though he added NATO was "very determined to provide effective defense and protection of our allies."
Rasmussen also said that he could not confirm reports of a Russian pullback from Ukraine's borders.
"This is not what we have seen," he told reporters in Brussels. "And this massive military buildup can in no way contribute to a de-escalation of the situation, a de-escalation that we all want to see, so I continue to urge Russia to pull back its troops, live up to its international obligation and engage in a constructive dialogue with Ukraine."
Al Jazeera and wire services