State news agencies quoted Medvedev as saying that he wouldn't like the ties to be severed but "if there is no other way to change the situation, the president could take this step."
Russia annexed Crimea from Ukraine in March 2014 following a hastily called referendum, and a conflict between Russia-backed separatists and Ukrainian forces flared up in eastern Ukraine weeks later.
Despite that and the conflict in the east, which has killed more than 9,500 people, Kiev and Moscow didn't break diplomatic ties.
Medvedev's announcement comes after Ukraine put its troops on combat alert yesterday along the country's de-facto borders with Crimea, amid an escalating war of words with Russia over Crimea.
German Foreign Minister Frank-Walter Steinmeier today appealed to Russia and Ukraine to avoid a further escalation in tensions after Moscow accused Kiev of sending "saboteurs" to conduct attacks in annexed Crimea.
He said in comments published by the Welt am Sonntag newspaper that Germany is in contact with both countries, and he plans to speak with Russian counterpart Sergey Lavrov during a previously planned visit to Russia on Monday.
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