UPDATE 2-Kremlin: EU sanctions that prompted Lithuania transit ban 'unacceptable'

* This content was produced in Russia, where the law restricts coverage of Russian military operations in Ukraine. (Adds comments by regional governor)

MOSCOW, June 22 (Reuters) - The Kremlin described the EU sanctions that led Lithuania to block the transit of some goods from mainland Russia to the exclave of Kaliningrad as "absolutely unacceptable" on Wednesday, and said Moscow was working on retaliatory measures.

Lithuania has shut the route to steel and other ferrous metals, which it says it is required to do under EU sanctions that took effect on Saturday, imposed in response to Russia's decision to send its armed forces into Ukraine.

Kaliningrad is connected to the rest of Russia by a rail link through Lithuania, a member of the EU and NATO.

"We are convinced that the illegal sanctions adopted by the European Union are absolutely unacceptable in this situation," Kremlin spokesperson Dmitry Peskov said in a call with reporters, adding that countermeasures were being prepared.

But Peskov and other Russian officials have remained tight-lipped about the exact nature of Moscow's response.

Earlier on Wednesday, foreign ministry spokesperson Maria Zakharova said Russia's retaliation would not be exclusively diplomatic but also practical. She also did not elaborate.

The governor of the Kaliningrad region, Anton Alikhanov, said it would propose possible retaliatory measures against Lithuania to the Kremlin and Russian government by the end of the week, TASS news agency reported. (Reporting by Reuters; Editing by Kevin Liffey and Philippa Fletcher)