Lithuania has banned the transit of some goods through its territory from Russia to its exclave of Kaliningrad.
It includes coal, metals, construction materials and advanced technology, accounting for around 50% of all goods that Kaliningrad imports.
Moscow said the move was "unprecedented" and "unlawful" and threatened to respond.
Lithuania's foreign minister Gabrielius Landsbergis said his country was simply implementing sanctions imposed by the EU, of which it is a member.
He said the measures introduced on Saturday were taken after “consultation with the European Commission and under its guidelines”.
No EU 'blockade'
The EU's foreign policy chief backed up Lithuania's stance, saying the country was not acting unilaterally and was only applying EU sanctions.
"In accordance with EU sanctions, there are imports and export restrictions that apply in relations with certain goods," Josep Borrell said on Monday.
"Lithuania is doing nothing else but implementing the guidelines provided by the Commission... if they transit through EU territory for some goods, it’s prohibited".
Borrell firmly denied that a "blockade" was being imposed between Kaliningrad and other parts of Russia, adding that the transit of passengers and goods that were not sanctioned continues.
Kaliningrad is a Russian exclave sandwiched between Poland and Lithuania. Home to some 430,000 people, it is isolated from the rest of Russia.
Trains with goods for Kaliningrad travel via Belarus and Lithuania. There's no transit through Poland. Russia can still supply the exclave by sea, without falling foul of EU sanctions.
'Unprecedented' and 'unlawful'
The local governor in Kaliningrad, Anton Alikhanov, urged people not to resort to panic buying and assured residents that two ships were already ferrying goods between Kaliningrad and Saint Petersburg - with seven more vessels expected to be in service by the end of the year.
"Our ferries will handle all the cargo," the governor said.
Russia's foreign ministry demanded Lithuania immediately lift the ban, saying that if transport links are not restored in full “Russia reserves the right to take action in defence of its national interests”.
Kremlin spokesman Dmitry Peskov called the ban “unlawful”.
“This decision, indeed unprecedented, is a violation of everything and then some. We understand that it is connected to the relevant decision of the European Union to extend the sanctions to transit (of goods). This we also consider unlawful,” Peskov told reporters on Monday.
What is Kaliningrad?
Sandwiched between EU and NATO members Poland and Lithuania, Kaliningrad is a port city and was an important Baltic Sea trading port for hundreds of years.
It's been part of the Soviet Union or Russia since the end of WWII and today is home to almost half a million people.
Although Kaliningrad is part of Russia, it has no land or sea borders with Russia, and receives all its Russian supplies via rail and gas pipelines through Lithuania.
The exclave is strategically important for Russia's military presence in the Baltic Sea. It is home to the headquarters of Russia's Baltic sea fleet.