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In a marked escalation of their sanctions campaign against Russia, the United States and the European Union hit the Kremlin on Friday with new penalties for its actions in Ukraine, targeting favored financial, energy and defense businesses.

The Western governments took steps to cut the flow of capital to these enterprises and to deprive the Russian energy sector, the foundation of the country's economy, of Western know-how and technology it needs to develop new energy fields. The measures will also sting for U.S. energy companies that have been dealing with Russian firms.

The West sharpened sanctions because of Russia's "direct military intervention and blatant efforts to destabilize Ukraine," Treasury Secretary Jack Lew said in a statement.

But officials said the U.S. and Europe could roll back those penalties if Russia observed all the points of a proposed peace plan and respects the week-old cease-fire in Ukraine's embattled eastern region.

The Obama administration hit Russia's largest bank, Sherbank, for the first time and also sanctioned 10 government defense and energy firms. The European Union sanctions, in addition to its penalties on defense, energy and financial firms, extended asset freezes and travel bans on 24 individuals believed to be connected to Russia's aggression in Ukraine.

To dry up Western financing, both the U.S. and the EU have made it illegal for their companies to buy debt with maturity of more than 30 days from key Russian banks.

The U.S. sanctions bar American companies from providing goods or services for the deepwater, Arctic and offshore and shale energy projects of five Russian companies: Rosneft, Gazprom, Gazprom Neft, Lukoil and Surgutneftegas.

The goal is to "effectively shut down this type of oil exploration and production activity," said an official who declined to be identified under ground rules set by the administration.

Among the U.S. firms that could suffer from the move is ExxonMobil, which has been working on a joint venture with Rosneft in the Arctic.

Analysts said this round of sanctions is likely to be especially painful to the Kremlin because it hits energy projects that are key to replacing fast-depleting Russian energy fields and also goes after state-run defense firms the government has been aiming to expand.

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U.S., European Union target Russian energy sector with new sanctions