Hammond was speaking after a meeting with his Portuguese counterpart, Rui Machete, at the Ministry of Foreign affairs in Lisbon.
At the same news conference, Machete cited the need to “find a solution for the grave risk of there being prolonged conflict in this area” before giving way to Hammond.
“If the ceasefire falls or we determine that Russia is not acting in good faith we must, in the first instance, consider taking a clear position on extending sanctions already in place, which expire in July, and prolong them until the end of the year,” the UK foreign secretary said. “That would send a very strong signal to Moscow.”
He noted that a list of new options for sanctions were being looked at, and could yet be used.
“We all want peace, but I have to say that the signs are not good,” Hammond said. “Putin is appealing to the Ukrainian forces to surrender in Debaltseve, which is not at all in the spirit of what was agreed last week and reveals Russia’s true intentions.”
Ukraine’s army was on Wednesday withdrawing some of its troops under siege in Debaltseve, after an offensive by rebels in the strategic city.
Hammond appealed to all parties involved in the signing of last week’s accord in Minsk to observe the spirit of that commitment, including laying down their arms and withdrawing from the frontline.
On the issue of military support for Ukraine, Hammond said that this was up to each country, but ruled out the UK doing this “at this moment”.