Crimea votes to join Russia, accelerating Ukraine crisis

SIMFEROPOL, Ukraine/BRUSSELS (Reuters) - Crimea's parliament voted to join Russia on Thursday and its Moscow-backed government set a referendum on the decision in 10 days' time in a dramatic escalation of the crisis over the Ukrainian Black Sea peninsula.

The sudden acceleration of moves to bring Crimea, which has an ethnic Russian majority and has effectively been seized by Russian forces, formally under Moscow's rule came as European Union leaders held an emergency summit groping for ways to pressure Russia to back down and accept mediation.

The 28-nation EU condemned Russian actions in Crimea as illegal, voiced support for Ukraine's territorial integrity but took only minor steps suspending talks with Moscow on visas and a new investment pact while warning of tougher steps if there is no negotiated solution within a short period.

By contrast, U.S. President Barack Obama announced immediate first steps to punish Russians and Ukrainians involved in what he called "threatening the sovereignty and territorial integrity of Ukraine", ordering the freezing of their U.S. assets and a ban on travel to the United States.

The names on the blacklist were not immediately made public but a U.S. official said they did not include Russian President Vladimir Putin.

The Pentagon also announced a large-scale air force exercise in Poland which Washington's ambassador to Warsaw said had been augmented to reassure U.S. allies in the region in the light of the Ukraine crisis.

The crisis began in November when Ukrainian President Viktor Yanukovich, under Russian pressure, turned his back on a trade deal with the EU and accepted a $15 billion bailout from Moscow. That prompted three months of street protests leading to the overthrow of Yanukovich on February 22.

Moscow denounced the events as an illegitimate coup and refused to recognise the new Ukrainian authorities.

STAKES RAISED

The Crimean parliament voted overwhelmingly on Thursday "to enter into the Russian Federation with the rights of a subject of the Russian Federation".

The decision, which diplomats said could not have been made without Putin's approval, raised the stakes in the most serious east-west confrontation since the end of the Cold War.

The vice premier of Crimea, home to Russia's Black Sea Fleet in Sevastopol, said a referendum on the status would take place on March 16. All state property would be "nationalised", the Russian rouble adopted and Ukrainian troops treated as occupiers and forced to surrender or leave, he said.

EU leaders, the U.S. State Department and the new government of Ukraine all branded the referendum decision illegal because it was incompatible with the Ukrainian constitution.

Russian stocks fell and the rouble weakened further after the referendum news. Moody's ratings agency said the stand-off was negative for Russia's sovereign creditworthiness.

On the ground, a mission of 35 unarmed military observers from the pan-European Organisation for Security and Cooperation in Europe was stopped from entering Crimea by unidentified men in military fatigues when they travelled from the port of Odessa, Poland's defence minister said.

In Brussels, European Council President Herman Van Rompuy outlined a three stage plan to try to resolve the crisis, while announcing that the EU would sign the political parts of an far reaching agreement with Ukraine before May 25 elections there, and offer the country extensive aid and trade benefits.

Unless Moscow opens negotiations with Ukraine and an international "contact group" soon, the EU would move to travel bans and asset freezes on Russian officials, and boycott a planned June Group of Eight summit in Olympic venue Sochi.

If Russia took action that destabilises Ukraine further, there would be "grave consequences" for bilateral economic ties, he said, without giving any deadlines. Poland's prime minister said the EU talks on sanctions had been "stormy", hinting at frustration at his inability to achieve stronger measures, which require a unanimous decision of 28 member states.

MILITARY ACTION

Putin has cited threats to Russian citizens to justify military action in Ukraine, as he did in Georgia in 2008. Far from seeking a diplomatic way out of the present crisis, Putin appears to have chosen to create facts on the ground before the West can agree on more than token action against him.

Ukrainian Prime Minister Arseny Yatseniuk said after meeting EU leaders that Ukraine's armed forces would act if Russian military intervention escalated any further into Ukrainian territory. "We are ready to protect our country," he said.

Military experts say Kiev's small and underequipped forces are no match for Moscow's superpower might.

The U.S. Navy announced a guided-missile destroyer, the USS Truxton, was heading to the Black Sea in what it said was a long-planned training exercise and not a show of force

Russian Foreign Minister Sergei Lavrov, who had refused to meet his Ukrainian counterpart on Wednesday, held talks with U.S. Secretary of State John Kerry in Rome, but said there was still no agreement after their third encounter in two days.

Earlier, Kerry discussed Ukraine with his colleagues from Britain, Germany, Italy and France, which are reluctant to impose sanctions, and informed them of U.S. plans to sanction individuals and officials whose identities were not made public.

The EU said it had frozen the assets of ousted Ukrainian president Yanukovich and 17 other officials suspected of human rights violations and misuse of state funds.

As expected, the EU summit was unwilling to adopt more than symbolic measures against Russia, Europe's biggest gas supplier, because neither industrial powerhouse Germany nor financial centre Britain is keen to trigger a tit-for-tat trade war.

France has a deal to sell warships to Russia that it is so far not prepared to cancel, London's banks have profited from facilitating Russian investment, and German companies have $22 billion invested in Russia.

The European Commission has announced aid of up to 11 billion euros ($15 billion) for Ukraine over the next couple of years provided it reaches a deal with the International Monetary Fund, entailing painful reforms like ending gas subsidies.

European Central Bank chief Mario Draghi said the crisis had already had a major impact on the Russian and Ukrainian economies, but little effect so far on the euro zone. However if political risks mounted, Europe's economy could also be hit.

ILLEGITIMATE

Russia kept the door ajar for more diplomacy on its own terms, announcing on Thursday a meeting of former Soviet states, including Ukraine, for April 4.

Lavrov said attempts by Western countries to take action over the Ukraine crisis via democracy watchdog OSCE and the NATO military alliance were not helpful.

He stuck to Putin's line - ridiculed by the West - that Moscow does not command the troops without national insignia which have taken control of Crimea, besieging Ukrainian forces, and hence cannot order them back to barracks.

Outside Crimea, in eastern and southern cities that saw big pro-Russian demonstrations, the tide of public opinion appears however to be turning in favour of Kiev.

Ukrainian police cleared pro-Moscow demonstrators from the regional parliament building in Donetsk, where pro-Kiev demonstrations are now much larger than pro-Moscow ones in the city, home town of ousted leader Yanukovich.

(Additional reporting by Luke Baker in Brussels, Elizabeth Piper, Lidia Kelly and Gabriela Baczynska in Moscow, Tim Heritage in Kiev, John Irish and Lesley Wroughton in Paris; Writing by Paul Taylor; editing by Anna Willard and Giles Elgood)