Ukraine's parliament has voted to create a 60,000-strong National Guard to bolster the country's defences.
The vote came ahead of Sunday's referendum in Crimea, now controlled by pro-Moscow forces, on whether citizens want to join Russia.
President Vladimir Putin insists Russia is not to blame for the crisis.
But Germany's Angela Merkel says Moscow faces "massive" political and economic damage if it refuses to change course. The US has also threatened action.
Meanwhile, Ukrainian gas tycoon Dmytro Firtash was arrested in the Austrian capital, Vienna, police there confirmed.
Mr Firtash, believed to be one of the richest men in Ukraine and one of the backers of the ousted Ukrainian President Yanukovych, is wanted by US authorities on suspicion of corruption.
Austrian police told the BBC the arrest had nothing to do with current political events.
The new National Guard is expected to be recruited from activists involved in the recent pro-Western protests as well as from military academies.
Ukraine's national security chief Andriy Parubiy said the Guard would be deployed to "ensure state security, defend the borders, and eliminate terrorist groups".
The Russian military and pro-Russian armed men moved in to seize key sites in Crimea - an autonomous region of Ukraine whose population is mainly ethnic Russian - in late February after the fall of President Viktor Yanukovych.
But Mr Putin told Paralympic delegates in the Black Sea port of Sochi on Thursday: "Russia was not the initiator of the circumstances that have taken shape."
But the German chancellor said on Thursday that Russia was exploiting the weakness of neighbouring Ukraine, rather than acting as a partner for stability.
She has threatened an escalating series of EU measures if Russia does not relax the tension in Ukraine.
In a statement to the Bundestag, she said political and diplomatic measures, rather than military action, were the way to resolve the crisis.
"If Russia continues on its course of the past weeks, it will not only be a catastrophe for Ukraine," she said.
"We would not only see it, also as neighbours of Russia, as a threat," Mrs Merkel told MPs. "And it would not only change the European Union's relationship with Russia. No, this would also cause massive damage to Russia, economically and politically."
Although she did not use the word sanctions, she warned that if there was no progress in the next few days, measures with "serious economic impact" would be taken.
"The territorial integrity of Ukraine cannot be called into question," she said.
Also on Thursday, the Organisation for Economic Cooperation and Development said it was suspending accession talks with Russia.
The 34-member OECD, which promotes good governance and economic policy initiatives, gave no explanation for its decision, adding that it would "respond positively to Ukraine's request" for closer ties.
EU foreign ministers are due to meet on Monday to consider their next steps. EU leaders have already suspended talks with Russia on easing visa restrictions as well as preparations for a G8 meeting in Sochi in June.
The leaders of the G7 group of industrial nations - Britain, Canada, France, Germany, Italy, Japan and the US - and the EU on Wednesday threatened to "take further action, individually and collectively" if Russia continues on its course.
Meanwhile, the head of the Duma (Russian parliament) international relations committee has acknowledged that Russian troops are involved in controlling Crimea - a break from Moscow's official position that the armed, uniformed men are "self-defence units".
"There are some military units there, which are in position in case there is an aggression, expansion from Kiev," Leonid Slutsky told Ekho Moskvy radio.
It was not a "large-scale military operation" but they were there to protect people and ensure there was no bloodshed, he said.
Welcoming Ukraine's interim Prime Minister Arseniy Yatsenyuk to the White House on Wednesday, US President Barack Obama pledged to "stand with Ukraine" in its dispute.
Mr Yatsenyuk said Ukraine "will never surrender" to Russia.
"It is absolutely unacceptable to have Russian boots on the Ukrainian ground in the 21st Century, violating all international deals and treaties," he said.
Tensions have been high since President Yanukovych fled Ukraine for Russia on 22 February following violent clashes between police and protesters in Kiev, in which more than 90 people were killed.
The protesters had been in Kiev's Independence Square since November, in protest at Mr Yanukovych's decision to reject a deal with the EU in favour of a bail-out from Russia.