Kiev warned it was on the brink of disaster and called up military reservists as pro-Moscow gunmen, believed to be acting under Kremlin orders, tightened their grip on Ukraine's Black Sea peninsula of Crimea.
A woman takes photos in front of armed servicemen and their armoured personnel carrier in the eastern Crimea's port city of Feodosiya.
Russia's parliament voted Saturday to allow troops to be sent into the ex-Soviet state -- a decision condemned by the United States as a "violation of Ukrainian sovereignty".
Symbolically billing themselves as the "G-7", the world leaders said in a statement that Russia's actions were incompatible with the Group of Eight nations, which Moscow joined in 1997, and said they would not take part in preparatory talks for June's G-8 summit in Sochi, Russia.
The statement, signed by the leaders of Britain, Canada, France, Germany, Italy, Japan, the United States and the presidents of the European Council and European Commission, was released by the White House.
Read: It's a David-and-Goliath battle for Ukraine and Russia
The leaders condemned "the Russian Federation's clear violation of the sovereignty and territorial integrity of Ukraine".
The G7 finance ministers promised "strong financial backing" for Ukraine.
Meanwhile UN Secretary General Ban Ki-moon ordered his deputy Jan Eliasson to fly Sunday to Ukraine, after two emergency sessions of the UN Security Council that saw Western countries trade blame with Russia for the unfolding crisis.
The deputy secretary general will then brief Ban "on the next steps the United Nations could take to support the de-escalation of the situation", a UN spokesman said.
'The brink of disaster'
US Secretary of State John Kerry, who will travel to Kiev on Tuesday to lend support to the new interim leaders, upped the stakes for Russian President Vladimir Putin by warning that Moscow risks losing its place among the G8 if the sabre-rattling does not halt.
Read: Russian incursion an incredible act of aggression: John Kerry
Ukraine's new Western-backed Prime Minister Arseniy Yatsenyuk -- in power for just a week following the overthrow of a pro-Russian regime -- told the nation of 46 million: "We are on the brink of a disaster."
Yatsenyuk warned in a televised address that any invasion "would mean war and the end of all relations between the two countries".
A senior US official said Russia now controls the strategic Crimea peninsula that has housed its navies since the 18th century.
Oil prices surged in Asian trade Monday. More than 70 percent of Russia's gas and oil flows to Europe pass through Ukraine.
Witnesses said Russian soldiers had moved out of their bases and blocked about 400 Ukrainian marines in the eastern port city of Feodosiya.
Read: All you need to know about Ukraine
AFP reporters saw a similar presence of troops outside a Ukrainian military installation near the Crimean capital Simferopol and other locations.
But the biggest blow to the new Kiev leaders came when Ukrainian Navy Commander Denis Berezovsky announced a day after his appointment that he was switching allegiance to the pro-Russian authorities in Crimea after gunmen surrounded his building and cut off its electricity.
Crimea's pro-Kremlin government chief Sergiy Aksyonov -- installed in power Thursday after an armed raid on the region's government building, and not recognised by Kiev -- immediately named Berezovsky as head of the peninsula's own independent navy.
Full combat alert
Fears of Russia's first invasion of a neighbour since a brief 2008 confrontation with Georgia, another former Soviet republic, prompted the largely untested interim team in Kiev to put its military on full combat alert and announce the call-up of all reservists.
The vast country on the eastern edge of Europe would face a David-and-Goliath struggle should the conflict escalate. Russia's army of 845,000 soldiers could easily overwhelm Ukraine's force of 130,000 -- half of them conscripts.
Putin said it was his duty to protect ethnic Russians in Crimea and southeastern swathes of Ukraine that have ancient ties to Moscow and look on Kiev's new pro-EU leaders with disdain.
Russian officials also argued they had no need to ask the UN Security Council for permission because the wellbeing of their own citizens was at stake.
NATO called for international observers to be sent to Ukraine and for Russia to pull back its forces, after urgent talks in Brussels.
The 28-nation alliance sought talks with Moscow as its head Anders Fogh Rasmussen warned Russia its troop movement "threatens peace and security in Europe".
Germany offered a rare glimmer of hope, saying Putin had agreed in a telephone conversation with Chancellor Angela Merkel to set up a contact group on Ukraine, enabling the opening of a political dialogue.
'Candid' Obama-Putin exchange
Events have moved rapidly since a three-month crisis in culturally splintered Ukraine -- long fought over by Moscow and the West -- sparked by pro-Kremlin president Viktor Yanukovych's decision to spurn a historic pact with the European Union in favour of closer ties with Russia.
It culminated in a week of carnage last month that claimed nearly 100 lives and led to Yanukovych's ouster.
The Kremlin appeared stunned by the loss of its ally and Kiev's subsequent vow to seek EU membership -- a decision that would shatter Putin's dream of reassembling a powerful economic and military post-Soviet bloc.
The White House said President Barack Obama told Putin in a "candid and direct" exchange his actions in Crimea were a "breach of international law".
Analysts called Ukraine the most serious crisis to test the West's relations with Moscow since the 1991 breakup of the USSR.
"The damage to Russia's relations with the West will be deep and lasting, far worse than after the Russian-Georgian war," Eugene Rumer and Andrew Weiss of the Carnegie Endowment for International Peace wrote in a report.
Pro-Kremlin sentiments remained strong in the Crimean capital.
"Crimea is Russia," one elderly lady told AFP in front of a statue of Soviet founder Lenin that dominates a square next to the occupied parliament building in Simferopol.
The mood in Kiev was radically different as about 50,000 people massed on Independence Square -- the crucible of both the latest wave of demonstrations and the 2004 Orange Revolution that first nudged Kiev on a westward path -- in protest at Putin's latest threat.
"We will not surrender," the huge crowd chanted under grey skies.