The United States froze assets and imposed visa bans on seven powerful Russians close to President Vladimir Putin on Monday and also sanctioned 17 Russian companies in reprisal for Moscow's actions in Ukraine. President Barack Obama said the moves, which add to measures taken when Russia annexed Crimea last month, were to stop Putin fomenting rebellion in eastern Ukraine—an allegation Moscow denies. A Russian diplomat voiced "disgust" at the White House.

Pro-Russian activists guard speakers in front of the stage during a rally held by pro-Russian activists in Lenin Square. Scott Olson | Getty Images

Among those sanctioned was Igor Sechin, head of state energy giant Rosneft. Its shares dropped nearly 2 percent, while the broader Moscow stock market rose almost 1 percent as investors decided the sanctions were softer than expected. The European Union, with more to lose than Washington from sanctions against Russia, a major energy supplier and trading partner for the EU, is also expected to announce new penalties after member governments reached a deal, diplomats said. "Russia's involvement in the recent violence in eastern Ukraine is indisputable," a White House statement said. Read MoreNew Russia sanctions could hit sectors of economy

Moscow insists that a rebellion among Russian speakers in the east against the Kiev authorities that took power after the overthrow of a Kremlin-backed president in February is a home-grown response to a coup and denies having forces on the ground. Armed men seized public buildings on Monday in another town, close to the rebel military stronghold of Slaviansk, where European military observers have been held captive since Friday. In Kharkiv, the biggest city in the east, the mayor was fighting for his life in hospital after being shot in the back by an assassin while out cycling. The motive was unclear. Hostage foreigners Germany demanded Russia act to help secure the release of seven unarmed European military monitors, including four Germans, who have been held by the rebels since Friday. But Moscow's ambassador to the OSCE security body for whom the men are working condemned the organization, of which Russia is a member, as "extremely irresponsible" for sending them in to eastern Ukraine. Nonetheless, he said, they should be freed.