KOSTYANTYNIVKA, Ukraine: The United States and Europe Monday whacked Russia with fresh sanctions for failing to stop soaring tensions in Ukraine, where a pro-Moscow mayor was shot and badly wounded and pro- Moscow militants seized another town and attacked a rally.
As Western powers stepped up the pressure on Moscow over the worst East-West crisis since the Cold War, the White House imposed 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.
The Kremlin hit back almost immediately, vowing a "painful" response for Washington.
Russian Deputy Foreign Minister Sergei Ryabkov told the Interfax news agency that Moscow was "disgusted" by the US action, which he said showed Washington had "completely lost touch with reality".
The US said it was prepared to "impose still greater costs" on Russia for what it called its "illegal intervention and provocative actions" in Ukraine.
Among those targeted was 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.
Washington has threatened to target specific sectors of the Russian economy if the tens of thousands of troops the Kremlin has ordered to the border actually invade Ukraine.
As the sanctions lashed Russia, tensions on the ground in eastern Ukraine showed little sign of easing.
Kalashnikov-toting militants seized the town hall of Kostyantynivka -- the latest of more than a dozen towns held by pro-Russian insurgents who were supposed to have disarmed under the Geneva deal.
Several people were wounded in Donetsk when pro-Russian militants wielding baseball bats and iron bars attacked a rally supporting the Western-backed authorities in Kiev, an AFP reporter on the scene said.
Earlier in Donetsk, some 300 masked men also using bats attacked a bank owned by a billionaire oligarch and regional governor who has clashed with Putin.
The pro- Moscow mayor shot in the back, Gennady Kernes, from the town of Kharkiv, remained in critical condition after surgery.
The identity and motive of the gunman who targeted him while he was riding his bicycle were unknown.
Meanwhile, negotiations were still under way to secure the release of a team of international observers from the OSCE, whose capture by rebels on Friday sparked global fury.
The pan-European security organisation held an emergency meeting in Vienna to discuss the rising threat in Ukraine to monitors overseeing the faltering Geneva accord.
The current head of the Organisation for Security and Cooperation in Europe, Swiss President Didier Burkhalter, told AFP: "We don't want to stop, but it is our responsibility to assess the situation steadily.... If there is a change, then we will act."
The OSCE envoy from Russia, which blames Kiev for the detentions, said it was "extremely irresponsible" to send them to Slavyansk.
On Sunday, the rebels presented the OSCE captives -- four Germans, a Pole, a Dane, a Czech and a Swede -- to the cameras for a news conference slammed as "repugnant" by Germany.
The Swede, who suffers from diabetes, was released later Sunday on medical grounds.
A spokeswoman for the rebels said all seven remaining detained inspectors were "alive and in good health".
The self-styled mayor of Slavyansk, Vyacheslav Ponomaryov, said the rebels had given the OSCE negotiators a list of names of detained pro-Russian militants they would accept as part of a prisoner swap.
Chief among these was Pavel Gubarev, self-proclaimed leader of the "people's governor" of Donetsk.
The International Committee of the Red Cross told AFP it was trying to gain access to the detainees and urged all sides to treat captives "humanely".
Moscow warned the new sanctions -- announced by President Barack Obama during a tour of Asia -- would lead "toward an escalation of the crisis".
"We will, of course, respond," Ryabkov said, adding: "We are certain that this response will have a painful effect on Washington."
After a brief period of optimism prompted by the Geneva accord, the crisis has lurched into increasingly dangerous ground, with Ukraine's prime minister warning that Moscow wanted to trigger a "third world war" with its military manoeuvres near the border.
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.
Ukraine also threatened to take Russia to court over its threat to cut off gas supplies if Kiev does not pay its bills.
Prime Minister Arseniy Yatsenyuk told reporters Ukraine would pay $2.2 billion to Russia's state-owned gas company Gazprom if it accepts a price of $268 per 1,000 cubic metres -- almost half of what the firm wants to levy.
The crisis has escalated at breathtaking pace since November when pro-Western protesters in Kiev began mass demonstrations against Kremlin-backed then-president Viktor Yanukovych after he rejected an agreement to bring Ukraine closer to the European Union.
After four months of protests, which turned deadly as authorities tried to break them up, Yanukovych was forced from power.
In response, Moscow launched a blitz annexation of the peninsula of Crimea and stepped up troop movements on the border.