Kerry told lawmakers in Washington during congressional hearings that Russia and pro-Moscow separatists were not respecting the Minsk ceasefire plan.
"To date, neither Russia nor the forces it is supporting have come close to complying with their commitements," Kerry said, adding that additional sanctions against Moscow were "teed up" if they were required. "If failure continues, there will be further consequences - consequences that would place added strains on Russia's weakened economy."
Kerry had said a day earlier that Moscow was telling "lies ... to my face" about its activities in eastern Ukraine. Moscow has always denied accusations from the West that it gives military support to the separatists.
Russia, meanwhile, has warned it could cut off Ukraine's gas supply within days over a payment dispute, which could by extension affect the EU. Authorities for the bloc's energy affairs announced plans on Wednesday to rehaul Europe's energy sector, seeking to reduce reliance on Moscow.
Hopes accord may be taking hold
The Ukraine conflict has reportedly experienced a rare fatality-free 24 hours. For the first time since the new Minsk truce came into effect 10 days ago, no deaths were reported in eastern Ukraine by either side in the past day.
The Ukrainian Security Council in Kyiv said one soldier was injured in that time, however.
Pro-Russian separatists on Tuesday said that they had begun pulling heavy weapons from the conflict frontline - one of the main tenets of the Minsk deal. But the Organization for Security and Cooperation in Europe (OSCE) has not confirmed this.
The assertion by the separatists came as France warned Russia of new consequences if there was an attack on the southeastern Ukrainian city of Mariupol. A commander on the separatist side, Eduard Basurin, was quoted on Tuesday as saying the rebels did intend to gain control of the city - but through "negotiations with the Ukrainian side."
France's foreign minister said that Europe would consider increased sanctions against Moscow if Mariupol came under attack.
"We've told the Russians clearly that if there was a separatist attack in the direction of Mariupol, things would be drastically altered, including in terms of sanctions," Laurent Fabius told France Info radio.
On Tuesday evening, Fabius hosted a meeting of his German, Russian, and Ukrainian counterparts to discuss the Minsk peace plan.
At that meeting, German Foreign Minister Frank-Walter Steinmeier said any effort by the rebels to take Mariupol "would completely change the foundation of the Minsk accords. We would be facing a new situation."
jr/msh (AFP, Reuters)