The US President has accused Vladimir Putin of deliberately ruining Russia’s economy to “recreate the glories of the Soviet empire”.
Barack Obama made the remarks at a conference during the G7 summit of nations, which was the G8 until Russia was suspended following the annexation of Crimea last year.
The Ukraine crisis has been a central focus for leaders from the UK, US, Canada, France, Germany, Italy and Japan.
The conflict and possible new sanctions against Russia reportedly took up two thirds of the discussion at a dinner on Sunday intended to cover all foreign policy.
Delegates expressed concern yesterday about continued battles between government troops and separatist rebels in the east of the country despite numerous rounds of failed peace talks and ceasefires.
Mr Obama claimed his Russian counterpart had to “make a decision” on what direction his country would continue in.
He continued: “Does he continue to wreck his country's economy and continue Russia's isolation in pursuit of a wrong-headed desire to recreate the glories of the Soviet empire, or does he recognise that Russia's greatness does not depend on violating the territorial integrity and sovereignty of other countries?”
Ukraine crisis: A timeline of the conflict
Ukraine crisis: A timeline of the conflict
1/22 30 November 2013
Public support grows for the “Euromaidan” anti-government protesters in Kiev demonstrating against Yanukovych’s refusal to sign the EU Association Agreement as images of them injured by police crackdown spread.
2/22 20 February 2014
Kiev sees its worst day of violence for almost 70 years as at least 88 people are killed in 48 hours, with uniformed snipers shooting at protesters from rooftops.
3/22 22 February 2014
Yanukovych flees the country after protest leaders and politicians agree to form a new government and hold elections. The imprisoned former Prime Minister, Yulia Tymoshenko, is freed from prison and protesters take control of Presidential administration buildings, including Mr Yanukovych's residence.
Genya Savilov/AFP/Getty Imageses
4/22 27 February 2014
Pro-Russian militias seize government buildings in Crimea and the new Ukrainian government vows to prevent the country breaking up as the Crimean Parliament sets a referendum on secession from Ukraine in May.
Sean Gallup/Getty Images
5/22 16 March 2014
Crimea votes overwhelmingly to secede from Ukraine and join Russia in a ballot condemned by the US and Europe as illegal. Russian troops had moved into the peninsula weeks before after pro-Russian separatists occupied buildings.
6/22 6 April 2014
Pro-Russian rebels seize government buildings in the eastern cities of Donetsk, Luhansk and Kharkiv, calling for a referendum on independence and claiming independent republic. Ukraine authorities regain control of Kharkiv buildings on 8 April after launching an “anti-terror operation” but the rest remain out of their control.
7/22 7 June 2014
Petro Poroshenko is sworn in as Ukraine's president, calling on separatists to lay down their arms and end the fighting and later orders the creation of humanitarian corridors, since violated, to allow civilians to flee war zones.
8/22 27 June 2014
The EU signs an association agreement with Ukraine, along with Georgia and Moldova, eight months after protests over the abandonment of the deal sparked the crisis.
LOUISA GOULIAMAKI/AFP/Getty Images
9/22 17 July 2014
Malaysian Airlines flight MH17 is shot down over eastern Ukraine, killing all 298 people on board. Ukrainian intelligence officials claim it was hit by rebels using a Buk surface-to-air launcher in an apparent accident.
10/22 22 August 2014
A Russian aid convoy of more than 100 lorries enters eastern Ukraine and makes drop in rebel-controlled Luhansk without Government permission, sparking allegations of a “direct violation of international law”.
11/22 29 August 2014
Nato releases satellite images appearing to show Russian soldiers, artillery and armoured vehicles engaged in military operations in eastern Ukraine.
12/22 8 September 2014
Russia warns that it could block flights through its airspace if the EU goes ahead with new sanctions over the ongoing crisis and conflict
13/22 17 September 2014
Despite the cease-fire and a law passed by the Ukrainian parliament on Tuesday granting greater autonomy to rebel-held parts of the east, civilian casualties continued to rise, adding to the estimated 3,000 people killed
14/22 16 November 2014
The fragile ceasefire gives way to an increased wave of military activity as artillery fire continues to rock the eastern Ukraine's pro-Russian rebel bastion of Donetsk
15/22 26 December 2014
A new round of ceasefire talks, scheduled on neutral ground in the Belariusian capital Minsk, are called off
16/22 12 January 2015
Soldiers in Debaltseve were forced to prepare heavy defences around the city; despite a brief respite to the fighting in eastern Ukraine, hostilities in Donetsk resumed at a level not seen since September 2014
17/22 21 January 2015
13 people are killed during shelling of bus in the rebel-held city of Donetsk
18/22 24 January 2015
Ten people were killed after pro-Russian separatists bombarded the east Ukrainian port city of Mariupol
19/22 2 February 2015
There was a dangerous shift in tempo as rebels bolstered troop numbers against government forces
20/22 11 February 2015
European leaders meet in Minsk and agree on a ceasefire in eastern Ukraine beginning on February 14. From left to right: Belarus President Alexander Lukashenko, Russian President Vladimir Putin, German Chancellor Angela Merkel, France's President Francois Hollande and Ukrainian President Petro Poroshenko.
MAXIM MALINOVSKY | AFP | Getty Images
21/22 13 February 2015
Pro-Russian rebels in the city of Gorlivka, in the Donetsk region, fire missiles at Ukrainian forces in Debaltseve. Fighting continued in Debaltseve for a number of days after the Minsk ceasefire began.
ANDREY BORODULIN | AFP | Getty Images
22/22 18 February 2015
Ukrainian soldiers repair the bullet-shattered windshield of their truck as their withdraw from the strategic town of Debaltseve. Following intense shelling from pro-Russian rebels, Ukrainian forces began to leave the town in the early hours of February 18.
Brendan Hoffman | Getty Images
The US President once again claimed Russian troops were fighting in Ukraine, an accusation Mr Putin has repeatedly denied.
“Russia's actions in Ukraine are hurting Russia and hurting the Russian people,” Mr Obama continued.
“And the G7 is making it clear that if necessary we stand ready to impose additional significant sanctions against Russia."
Mr Putin has not officially responded to the speech but Russian media outlets reacted on Tuesday morning.
Russia Today quoted a political commentator slamming “Cold War talk that is driven by the Americans” and claiming EU countries were being “forced to work against their own interests” by the US.
Sputnik, a news service owned by the Russian government, carried an article on the front page of its website saying President Obama had “lost total credibility”.
A spokesperson at the Kremlin played down Mr Putin’s absence from the summit and said he was concentrating on “work in other more effective formats” that better reflect the international situation.
"It's impossible now to get together in seven or eight people and effectively discuss global problems," RIA news agency quoted Dmitry Peskov as saying.
Canadian Prime Minister Stephen Harper and Japan's Shinzo Abe both visited Kiev before the G7 summit and voiced strong support for President Petro Poroshenko.
Angela Merkel, who was hosting the summit in Bavaria, has led diplomacy to engage Mr Putin in a diplomatic solution to the conflict, told reporters that sanctions against Russia could be lifted if Moscow and the separatists fully implemented the Minsk peace deal struck earlier this year.
Additional reporting by ReutersReuse content