(Adds Putin, Kerry quotes, shooting incident)
* Putin says use of force would be last resort
* Russian markets rise, euro and dollar strengthen
* No major new troop movements in Crimea
* U.S. official says Washington working on sanctions
By Vladimir Soldatkin and Alexei Anishchuk
MOSCOW, March 4 President Vladimir Putin
delivered a robust defence of Russia's actions in Crimea on
Tuesday and reserved the right to use force in Ukraine as a last
resort, but he sought to ease East-West tension over fears of
war in the former Soviet republic.
Russia could use all options to protect compatriots who were
living in "terror" in Ukraine, Putin told his first news
conference since the crisis began, but force was not needed for
now. His comments lifted Russian bond markets after a panic
sell-off on Monday.
Putin said Western sanctions under consideration against
Russia would be counter-productive. A senior U.S. official said
Washington was ready to impose them in days rather than weeks.
U.S. Secretary of State John Kerry arrived in Kiev on his
first visit since the overthrow of Russian-backed President
Victor Yanukovich, describing the experience as "moving,
distressing and inspiring".
He announced a $1 billion economic package and technical
assistance to support for the new government.
Putin said there had been an unconstitutional coup in
Ukraine and Yanukovich, who fled to Russia last week, was still
the legitimate leader. No Ukrainian government elected under
current circumstances, with "armed terrorists" in control, would
be legitimate, he said.
The Feb. 22 ousting of Yanukovich after months of street
protests in Kiev, and Russia's bloodless seizure of Ukraine's
Crimea region, have prompted the most serious confrontation
between Moscow and the West since the end of the Cold War.
Western governments have been alarmed at the possibility
that Russia may also move into eastern and southern Ukraine,
home to many Russian speakers, which Putin did not rule out.
"There can be only one assessment of what happened in Kiev,
in Ukraine in general. This was an anti-constitutional coup and
the armed seizure of power," he said, looking relaxed as he sat
before a small group of reporters at his residence near Moscow.
"As for bringing in forces. For now there is no such need
but such a possibility exists," he said. "What could serve as a
reason to use military force? It would naturally be the last
resort, absolutely the last."
Earlier on Tuesday, Putin ordered troops involved in a
military exercise in western Russia, close to the border with
Ukraine, back to their bases. He said armed men who had seized
buildings and other facilities in Crimea were local groups.
But in a sign of the extreme fragility of the situation on
the ground in Crimea, a Russian soldier fired three volleys of
shots over the heads of Ukrainian airmen who marched unarmed
towards their aircraft at a military airfield surrounded by
Russian troops at Belbek, near the port of Sevastopol.
After a standoff in which the two commanders shouted at each
other and Russian soldiers levelled rifles and rocket-propelled
grenade launchers at the Ukrainians, the incident was defused
and the Ukrainians eventually dispersed. No one was hurt.
TENSIONS STILL HIGH
Russian dollar bond markets rebounded on Tuesday, encouraged
by Putin's comments.
Russia had paid a heavy financial price on Monday for its
military intervention in Ukraine, with nearly $60 billion wiped
off the value of Russian firms on the Moscow stock market.
Despite Putin's more conciliatory comments, Russia has shown
few signs of de-escalating its conflict with Ukraine so far,
NATO said on Tuesday as its members held emergency talks on the
crisis. Other incidents showed tensions remained high.
Turkey on Monday scrambled eight F-16 fighter jets after a
Russian surveillance plane flew along its Black Sea coast, the
Kerry's visit to Kiev comes as Washington and its Western
allies step up pressure on Moscow to withdraw its troops from
Crimea or face economic sanctions and diplomatic isolation.
A senior U.S. administration official said Washington would
work with Congress to approve $1 billion in loan guarantees to
help lessen the impact on Ukrainians of proposed energy subsidy
In further pressure on Kiev, Russia's top gas producer
Gazprom said it would remove a discount on gas prices
for Ukraine from April.
Putin secured parliamentary backing at the weekend to invade
Ukraine if necessary to protect Russian interests and citizens
after Yanukovich's downfall. Russia's Black Sea Fleet has a base
in Crimea, a peninsula which has an ethnic Russian majority.
The military exercises in central and western Russia, which
began last week and raised fears that Russia might send forces
into Russian-speaking regions of east Ukraine, were completed on
The announcement that troops and their headquarters were
returning to barracks sent a more conciliatory message than much
of the rhetoric from Russian officials.
Putin is dismayed that the new leadership in Ukraine, the
cradle of Russian civilisation, has plotted a course towards the
European Union and away from what had been Moscow's sphere of
influence during generations of Soviet Communist rule.
Ukraine said observers from the Organization for Security
and Cooperation in Europe, a pan-European security body, would
travel at its invitation to Crimea in an attempt to defuse the
military standoff there.
Ukrainian officials say Moscow has poured additional troops
into Crimea, a region which former Soviet leader Nikita
Khrushchev transferred from Russia to Ukraine in 1954 when both
republics were part of the Soviet Union.
The United States has begun spelling out its response to
Russia's incursion, announcing a suspension of all military
engagements with Russia, including military exercises and port
visits, and freezing trade and investment talks with Moscow.
President Barack Obama met national security advisers on
Monday to discuss how the United States and its allies could
"further isolate" Russia, a White House official said.
"Over time this will be a costly proposition for Russia,"
Obama told reporters.
A Kremlin aide said that if the United States did impose
sanctions, Moscow might drop the dollar as a reserve currency
and refuse to repay loans to U.S. banks.
The European Union, which will hold an emergency summit on
Thursday, has threatened unspecified "targeted measures" unless
Russia returns its forces to their bases and opens talks with
Ukraine's new government.
Western leaders have sent a barrage of warnings to Putin
against armed action, threatening economic and diplomatic
consequences, but are not considering a military response.
There was no immediate sign of any new movements by Russian
forces in Crimea overnight.
Ukrainian officials said Russia was building up armour on
its side of the 4.5-km (2.7-mile) wide Kerch strait between the
Crimean peninsula and southern Russia.
Russian forces shipped three truckloads of troops by ferry
into Crimea after taking control of the border post on the
Ukrainian side, Ukraine's border guards spokesman said.
Vladimir, a 50-year-old cab driver from Kerch, said people
do not want the Russians to leave.
"When they are here, it is safer," he said, voicing the
opinions of some in the region who fear a return to the chaos in
Ukraine after the collapse of the Soviet Union.
Kiev's U.N. ambassador, Yuriy Sergeyev, said Russia had
deployed roughly 16,000 troops to Crimea since last week.
Italian Foreign Minister Federica Mogherini said Russia had
agreed to meet NATO representatives on Wednesday to discuss
Ukraine. EU leaders will hold an emergency summit on Thursday.
(Additional reporting by Pavel Polityuk, Natalia Zinets and
Lesley Wroughton in Kiev, Andrew Osborn in Sevastopol, Thomas
Peter in Kerch, Mike Shields in Vienna; Writing by Timothy
Heritage and Giles Elgood; editing by Anna Willard and Paul