Russian-supported separatists have firmly gained control of Novoazovsk, a strategically placed town in Ukraine.
Ukrainian officials are concerned the rebels are trying to create a land link between Russia and the Crimean peninsula.
The move would also give Russia control over the gas and mineral riches in the Sea of Azov.
What are the ramifications of having Russian troops in Ukraine? Boris Zilberman, Russian expert with the Foundation for Defense of Democracies, talks about this and more.
Jen Psaki, a State Department spokeswoman, said Russia is being dishonest about its actions, even to its own people.
"These incursions indicate a Russian-directed counteroffensive is likely underway in Donetsk and Luhansk," she said.
Ukraine has already lost about half of its coastline.
An Associated Press journalist saw rebel checkpoints at the outskirts of the town and was told he could not enter.