In a speech to the German parliament, the Bundestag, on Thursday Chancellor Merkel used her strongest rhetoric since the start of the crisis to condemn Russia’s actions in Ukraine.
She said the EU and other western nations were prepared to freeze bank accounts and impose travel restrictions if Russia refused to enter "negotiations that achieve results."
She said if negotiations aren't effective further measures will be taken that "will cause massive damage to Russia, both economically and politically," referring to sanctions.
Merkel, however, explicitly ruled out military action and said Russia's deployment of troops to Crimea "was a breach of international law."
Last month, Moscow sent thousands of soldiers to Ukraine's southern Crimean peninsula. Russian President Vladimir Putin has said he was answering calls for help from ethnic Russians who believe they are threatened by EU supporters in Ukraine. Moscow does not recognize the legitimacy of Ukraine's transitional government.
"The territorial integrity of Ukraine cannot be called into question," Merkel told lawmakers, three days ahead of a referendum that is to be held in Ukraine’s Crimea on joining Russia.
The German chancellor also said Europe was ready to stand by former Soviet republics in the face of possible Russian aggression, such as Moldova or Georgia.
"In a period of enormous uncertainty in the Ukraine, Russia has not proven to be a partner for stability for neighboring countries which it has close links to but it uses their inherent weaknesses," Merkel said.
Referendum due Sunday
A controversial referendum is due on Sunday among residents of Ukraine's Black Sea peninsula, Crimea, on whether the region should become part of the Russian Federation.
Western leaders have called the referendum illegal and have accused Russian President Vladimir Putin of stoking ethnic tensions for his own gain in the majority Russian-speaking territory. Minority ethnic groups - some of whom were persecuted by Russia in the past - have said they want to remain part of Ukraine and say the referendum is not legitimate.
The interim government in Kyiv, which is to hold elections on May 25, has found itself not only trying to stabilize a country politically divided after several months of popular protests, but also attempting to deescalate tensions with Russia.
Meeting with US President Barack Obama on Wednesday, Ukrainian Prime Minister Arseniy Yatsenyuk vowed that his country would not buckle under pressure from Moscow.
"Ukraine is and will be part of the Western world," Yatsenyuk told reporters. President Obama reiterated Washington's support for Kyiv, saying: "We will stand with Ukraine."
hc/tj (Reuters, AFP, AP, dpa)