Prime Minister John Key says Russia's actions in Ukraine mean New Zealand would not be comfortable signing the free trade deal with Russia that is very close to being completed.
Russia's ambassador Valery Yakovlevich Tereshchenko was summoned to the Ministry of Foreign Affairs and Trade on Monday afternoon so he could be informed of New Zealand's deep concerns over the escalation of tensions in Ukraine.
Ukraine's military is on its highest alert as Russian forces consolidate their hold on Crimea, where the population is mostly Russian.
John Key says New Zealand condemns the breach of Ukraine's sovereignty and territorial authority.
Mr Key told reporters that the free trade agreement with Russia represents about three years of negotiations and there are positive signals it will soon be completed. However, he says Russia's actions are such that now would not be the right time to sign.
"I can't rule out that there may be some impact on the timetable for concluding the FTA. While a delay would be disappointing, we take our international responsibilities seriously and intend to respond in a manner that is in line with the countries who share our values and perspectives."
New Zealand is not abandoning the trade talks altogether, but it does view Russia's current actions as totally unacceptable, he says.
Mr Key says Trade Minister Tim Groser who has been in Moscow working on the deal was toldon Monday to finish his meetings and leave the country.
New Zealand is calling for Russia to use diplomacy in Ukraine, not force.
Foreign Minister Murray McCully says New Zealand understands that Russia has significant interests - particularly in the Crimean Peninsula - but it needs to pursue those interests in a manner that is consistent with its treaty obligations and international law.
Labour's foreign affairs spokesperson David Shearer says given the seriousness of the situation Labour supports the withdrawal of Mr Groser from negotiations with Russia.
He says Ukraine's territorial integrity must be preserved and any foreign forces should leave the country immediately.