The G7 group of top economic powers on Monday scrapped a planned meeting to be hosted by Russia as they sought to deepen Moscow's isolation over the Ukraine crisis.
After emergency talks on the Ukraine crisis called by US President Barack Obama, the G7 said they would hold a meeting in Brussels without Russia instead of the wider G8 summit that was to have taken place in Sochi.
The G7 also threatened tougher sanctions against Russia for its annexation of Crimea that has plunged relations between the West and Moscow to their lowest level since the end of the Cold War.
But Russian Foreign Minister Sergei Lavrov defiantly dismissed such a move as "no great tragedy" after separate talks with US Secretary of State John Kerry and Ukraine's interim Foreign Minister Andriy Deshchytsya.
"If our Western partners think that this format has outlived itself, then so be it," Lavrov told reporters.
"We are not trying to hold on to this format, and we see no great tragedy if it (the G8) does not meet," Lavrov said, insisting that Crimea has "a right to self determination."
Russia's takeover of the region was not "malicious intent," said Lavrov but was to "protect the Russians who have been living there for hundreds of years."
-- Concern over missing troops --
Kerry met with Lavrov for over an hour earlier in the day, his spokeswoman Marie Harf said, welcoming the Russia-Ukraine talks, the highest level contact between Russia and Ukraine since the start of the crisis.
He reiterated to Lavrov US concern about the massing of Russian troops on Ukraine's border and the treatment of Ukrainian troops, "including many Ukrainian service members who are missing," Harf said.
Kerry reminded Lavrov that Obama has signed an executive order "that provides the flexibility to sanction specific industries if Russia continues to take escalatory steps," Harf said, urging Russia to de-escalate the situation and pursue a dialogue with the Ukrainian government.
Ahead of the talks, Obama stressed that Europe and the United States were "united in our support of the Ukrainian government and the Ukrainian people" and "united in imposing a cost on Russia for its actions so far".
In Crimea, Russian forces stormed a Ukrainian navy ship, with an AFP correspondent reporting plumes of smoke as a Ukrainian defence spokesman said the crew had fired smoke grenades in self-defence.
Ukraine's interim Foreign Minister Deshchytsya stressed that Kiev sought to resolve the crisis through diplomacy.
"The position of the Ukrainian government is to use all peaceful means, all diplomatic and economic means to resolve this conflict peacefully," Deshchytsya told reporters.
"However, we don't know what are the Russian plans. What the plans of President (Vladimir) Putin (are). That's why we ask for meetings with the Russians," he said, before holding talks with Lavrov.
The diplomatic efforts came as Ukrainian authorities pulled out all servicemen and their families to the mainland.
In a televised address to the nation, Ukraine's acting president Oleksandr Turchynov said a decision had been taken "to conduct a redeployment of military units stationed in the Autonomous Republic of Crimea".
Turchynov's announcement came less than a month after Putin won authorisation to use force in response to the February 22 ouster of pro-Kremlin president Viktor Yanukovych's regime by more nationalist leaders who are seeking a closer alliance with Europe.
Ukraine's increasingly demoralised forces had been steadily losing ground on the Black Sea peninsula and saw their main airbase outside the regional capital Simferopol stormed on Saturday.
Earlier Monday, the White House said it was "very concerned" about the risk of escalation as Russia massed its troops on Ukraine's eastern border.
A top NATO commander had warned that the Western military alliance was carefully watching massive Russian troop formations that could theoretically make a push across the vast ex-Soviet country at any point.
Moscow has denied any such plans despite Putin's open ambition to resurrect vestiges of the Soviet empire and stamp his authority over eastern European nations that sought protection from the West following the 1989 fall of the Berlin Wall.
But the Kremlin has made clear it intends to "protect" compatriots in the Russified southeastern swaths of Ukraine that it says have been victimised by violent nationalists since last month's rise to power of a pro-European team.
The Kremlin stamped its claim on Crimea on Monday with a symbolic visit by Defence Minister Sergei Shoigu -- the first top Moscow official to visit the mostly Russian-speaking region of two million people since its March 16 independence referendum.