* Russian troops pull out of base in Rostov border region
* Putin tells Merkel of partial troop drawdown at Ukrainian
* Russian govt vows to raise pensions, state wage in Crimea
* Ukraine denounces visit as "crude violation"
(Adds NATO meeting set for Tuesday, paragraphs 12-14)
By Darya Korsunskaya
SIMFEROPOL, Crimea, March 31 Prime Minister
Dmitry Medvedev flaunted Russia's grip on Crimea by flying to
the region and holding a government meeting there on Monday,
angering Ukraine and defying Western demands to hand the
peninsula back to Kiev.
But in a gesture that could ease tension in the worst
East-West standoff since the Cold War, Russia pulled some troops
back from near Ukraine's eastern frontier - a move the United
States said would be a positive sign if it is confirmed as a
At the Kadamovsky training ground, a Reuters reporter saw
hundreds of troops pile into over 40 armoured personnel carriers
and a long line of military trucks. The convoy then headed off
from the area, which lies in the Rostov border region.
President Vladimir Putin told German Chancellor Angela
Merkel that he had ordered a partial drawdown in the region,
Merkel's spokesman said.
But Medvedev's visit taunted Western leaders by underlining
their inability to force Putin to relinquish Crimea, seized
after the overthrow of Russian-backed Ukrainian President Viktor
Yanukovich and formally annexed on March 21.
Accompanying Medvedev, outspoken Deputy Prime Minister
Dmitry Rogozin, who has been targeted by Western sanctions, left
no doubt about the symbolism of the trip, saying on Twitter:
"Crimea is ours. Basta!"
The Ukrainian government denounced the visit as a "crude
violation" of the rules of diplomacy, a few hours after the
latest round of crisis talks between Russia and the United
States ended inconclusively.
Western countries have expressed concern about a Russian
troop buildup on the Ukraine border.
But the Russian Defence Ministry said a battalion from the
central military district's 15th motorised infantry brigade was
pulling back to its home base of Samara on the Volga River after
what it called month-long exercises.
In Washington, the White House reacted cautiously to the
troop movements. "We've seen the reports and if they are true
and if - more importantly - they represent further withdrawals,
that would be a positive sign," said spokesman Jay Carney. "It
is certainly something that we have explicitly called for."
Putin and Merkel also discussed by phone ways of stabilising
Ukraine and another former Soviet republic, Moldova. A Kremlin
statement quoted Putin as calling for a comprehensive solution
that would end what he called a "blockade" of Moldova's
breakaway region of Transdniestria.
NATO foreign ministers meet in Brussels on Tuesday to
examine steps to reinforce Eastern European countries worried by
Russia's annexation of Crimea.
Diplomats said the ministers from the 28-member alliance
would look at options ranging from stepped-up military exercises
and sending more forces to Eastern member states, to the
permanent basing of alliance forces there - a step Moscow would
view as provocative.
The NATO ministers, in a meeting with Ukrainian Foreign
Minister Andriy Deshchytsia, are also expected to offer help to
make Ukraine's armed forces more efficient.
Soon after Medvedev landed with Cabinet members in Crimea's
main city of Simferopol, he held a government meeting on moves
to revive the region's struggling economy, including by creating
a special economic zone to ease tax and customs duties.
"Our aim is to make the peninsula as attractive as possible
to investors, so that it can generate sufficient income for its
own development," he said, in a meeting that included Crimean
leaders and was broadcast live on Russian state television.
In comments that made clear Russia had no plans to
relinquish the region, he set out moves to increase wages for
140,000 state workers in Crimea, boost pensions, turn the region
into a tourism hub, protect energy links, end reliance on
Ukraine for water and improve its roads, railways and airports.
Chants of "Russia!" and "Thank you!" from a
Russian-flag-waving crowd greeted Medvedev on his visit to
Sevastopol, home of Russia's Black Sea Fleet. Some welcomed him
with a hug and kiss.
"We will take care of Sevastopol. Everything will be fine,"
he told the crowd on a visit to cement and celebrate Moscow's
acquisition of Crimea, which has an ethnic Russian majority and
had been transferred from Russia to Ukraine by Soviet leader
Nikita Khrushchev in 1954.
Underscoring Crimea's reintegration into Russia, the Foreign
Ministry issued a statement on Monday warning that foreigners
would now require a Russian visa to travel to Crimea.
NO AGREEMENT AT TALKS
Ukraine sent a protest note to Moscow over Medvedev's trip,
declaring that an official visit to its territory without its
consent "is a crude violation of the rules of the international
Medvedev flew to Crimea after U.S. Secretary of State John
Kerry met Russian Foreign Minister Sergei Lavrov in Paris late
on Sunday and reiterated that Washington considered Russia's
actions in Crimea "illegal and illegitimate".
Kerry said resolving the crisis over Ukraine depended on a
pullback of what the United States has put at up to 40,000
Russian troops near Ukraine's eastern border.
The United States and Russia's top diplomats also continued
talks by phone on Monday, officials said. A senior State
Department official said Lavrov's call was to inform Kerry of
the pullback of one battalion from the border.
Russia has described the troop buildup as part of war games.
Ukrainian Major-General Oleksandr Rozmaznin, told journalists in
Kiev that the number of troops near the border had been reduced
but that might just reflect a scheduled rotation of conscripts.
The United States and European Union have imposed sanctions
on Russian officials since a March 16 referendum in which Crimea
voted for union with Russia. The West says the vote was a sham
as Russian forces had already taken control of the region.
Russia has shrugged off the sanctions, although the
absorption of Crimea and its 2 million residents creates an
additional financial burden as Russia struggles with slow
growth, rising inflation, a weak currency and unusually high
capital flight this year.
Medvedev said he hoped Crimea's "colossal prospects" for
tourism income would help it become self-sufficient.
A senior local economic official said the impoverished Black
Sea peninsula hoped for an economic leap forward with
large-scale investments, state subsidies and tax breaks from
"We have underdeveloped infrastructure and poor people. Now
all this has just come to an end and we will finally start
dynamic development," Rustam Temirgaliyev, Crimea's first deputy
prime minister, told Reuters.
Crimea has a large budget deficit, and relies on Ukraine for
85 percent of its electricity, 90 percent of its drinking water
and much of its food.
Boosting the local economy and tourism faces big obstacles,
not least a decision by the EU this month to impose heavy
tariffs on goods from the annexed region.
Of the 6 million to 8 million tourists a year who visited
Crimea before Moscow intervened, more than 60 percent were from
Ukraine, and only a quarter from Russia.
A young woman in Simferopol who gave her name only as Yulia
welcomed Medvedev's visit: "It's always good when top figures
pay us visits because they usually bring money, and this is what
($1 = 35.6877 Russian Roubles)
(Additional reporting by Sergei Venyarsky at Kadamovsky
training grounds, Gabriela Baczynska in Simferopol, Lesley
Wroughton in Jerusalem, Steve Gutterman in Moscow, Mark
Felsenthal in Washiogton, and Richard Balmforth, Natalia Zinets
and Pavel Polityuk in Kiev, and Adrian Croft in Brussels,;
Writing by Timothy Heritage and Alissa de Carbonnel; Editing by
Will Waterman, David Stamp, Peter Cooney and Lisa Shumaker)