Russian Foreign Minister Sergey Lavrov told journalists that rocket shelling on Saturday in the city of Mariupol, which left at least 30 people dead, was a tragedy that was being manipulated to "whip up anti-Russian hysteria" in the West.
The ruble tumbled by almost 3 per cent on news of more possible sanctions against Russia, dropping to 65.5 to the dollar from 63.7.
Lavrov blamed Kiev for the uptick in violence, and said that the rebels were only responding to a government offensive.
"To expect that they (the rebels) would simply reconcile themselves to being bombed would be naive," he said. "They started to act... with the goal of destroying Ukrainian army positions being used to shell populated areas."
The Russian economy has been hit hard by Western sanctions and plummeting oil prices, and the ruble has already lost about half its value in the past year.
While sanctions are set to expire this summer, President Barack Obama yesterday said that Washington would work with its European partners to "ratchet up the pressure on Russia" in response to the latest violence.
EU foreign ministers will hold an extraordinary session on Thursday to discuss the situation in Ukraine.
At least 5,100 people have been killed in eastern Ukraine since fighting began in April, but fighting this week was the most intense since a cease-fire deal was signed in September.
Mariupol, a strategic port city on the Black Sea still controlled by Ukrainian forces, has been a symbolic bulwark against the separatist advance that if captured by the rebels would give them a land corridor to Russia-controlled Crimea.

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