Kerry visits Kiev, brings economic package and technical aid

Russian President Vladimir Putin said on Tuesday that Russia would only use military force in Ukraine as a last resort, in remarks apparently intended to ease East-West tension over fears of war in the former Soviet republic.

Russian President Vladimir Putin takes part in a news conference at the Novo-Ogaryovo state residence outside Moscow March 4, 2014. [Photo/Xinhua]

Russia however reserved the right to use all options in Ukraine to protect its compatriots there who were living in "terror", Putin said.

While Putin said sanctions being considered against Russia would be counter-productive, a senior US official said Washington was ready to impose them in days rather than weeks.

US Secretary of State John Kerry arrived in Kiev on Tuesday and announced an economic package and technical assistance for Ukraine in a show of support for its new government amid escalating tensions with Russia.

Putin, meanwhile, ordered tens of thousands of Russian troops participating in military exercises near Ukraine's border to return to their bases.

The massive military exercise in western Russia involved 150,000 troops, hundreds of tanks and dozens of aircraft. It was not clear if Putin's move was an attempt to heed the West's call to de-escalate the crisis that has put Ukraine's future on the line, but the news has brought relief to the markets and settled the price of oil.

Russian forces remain in de facto control of Crimea - a strategic Black Sea peninsula that has housed the Russian Black Sea Fleet since the 18th century - but there were no signs of them conducting a military offensive overnight.

Ukraine said on Monday that Russia had issued Ukrainian soldiers in Crimea an ultimatum to surrender by dawn or face an all-out assault. Russia had denounced the claim as "complete nonsense".

Kerry, the highest profile foreign visitor to Kiev since the Feb 22 ouster of Kremlin-backed president Viktor Yanukovych, was to meet members of the new government.

He will "reaffirm the United States' strong support for Ukrainian sovereignty, independence, territorial integrity, and the right of the Ukrainian people to determine their own future, without outside interference or provocation", the US State Department said.

Kiev's new leaders were installed after three months of protests culminated in days of violence that claimed nearly 100 lives and led to Yanukovych's replacement by a team that is seeking help from the West.

The situation escalated further on Monday when Washington announced a raft of tough sanctions against Russia.

"We have, in light of recent events in Ukraine, put on hold all military-to-military engagements between the US and Russia," US Defense Department spokesman Rear Admiral John Kirby said.

The suspension of the post-Cold War cooperation covers joint exercises and bilateral meetings as well as port visits and planning conferences.

There was no immediate response from either Putin or the Russian Foreign Ministry to Washington's decision to toughen its stance.

But Sergei Glazyev, a top economic aide to Putin warned that Russia could stop using dollars for international transactions and reduce its economic dependence on the Unites States to "zero".

"An attempt to announce sanctions would end in a crash for the financial system of the US, which would cause the end of the domination of the US in the global financial system," Glazyev said.

US President Barack Obama accused the Kremlin on Monday of being on the "wrong side of history" on Ukraine by violating its sovereignty and international law - comments that echoed Washington's criticism of Russia's position on Syria.

Obama said Washington was "examining a whole series of steps - economic, diplomatic - that will isolate Russia."

US officials then announced a series of punitive measures designed to puncture Russia's geopolitical prestige as well as its military and economic ambitions.

US media reports cited administration sources as saying Washington would also consider canceling the visas of officials involved in the Crimea operation.

The EU warned Russia that ties were at risk without a "de-escalation".