Europe mulls response to Russia's absorption of Crimea

European leaders will meet on Thursday to discuss ways to punish Russia for its absorption of Crimea, as Ukraine draws up plans to pull troops out of the flashpoint peninsula.

The EU faces tough decisions in finding a credible response to an explosive security crisis on its eastern frontier, with biting sanctions likely to hurt member states with strong economic links to Russia.

Kiev said it was looking to withdraw its embattled troops from Crimea after pro-Moscow forces seized naval bases and detained Ukraine's naval chief in a tightening of Russia's grip on the peninsula.

An ultimatum set by Ukraine's acting president Oleksandr Turchynov for Crimean authorities to release naval commander Sergiy Gayduk expired late Wednesday as the White House warned Russia it was "creating a dangerous situation".

Meanwhile Kiev announced it was dropping out of a key post-Soviet alliance and would slap entry visas on Russians in response to Moscow's absorption of the strategic Black Sea peninsula.

A defiant President Vladimir Putin brushed aside global indignation and Western sanctions on Tuesday to sign a treaty absorbing Crimea and expanding Russia's borders for the first time since World War II.

A Sunday referendum in Crimea, dismissed as illegal by Kiev and the West, showed nearly 97% supporting a shift from Ukrainian to Kremlin rule.

Putin employed the help of local militias to seize the mostly Russian-speaking peninsula – a region the size of Belgium that is home to two million people as well as Russia's Black Sea Fleet – after a tumultuous change in leadership in Kiev in February.

Three months of street revolts led to the ouster of pro-Kremlin president Viktor Yanukovych by pro-Europe leaders who spearheaded three months of deadly protests aimed at pulling Ukraine out of the Kremlin's orbit.

NATO head Anders Fogh Rasmussen said Russia's intervention in Crimea marked "the gravest threat to European security and stability since the end of the Cold War."

'Real economic pain'

The European Union's 28 heads of state and government will meet Thursday for their second round of talks on the Ukraine crisis in less than two weeks.

The bloc has already suspended talks on easing visas into Europe for Russian travellers and slapped an asset freeze and travel ban on 21 Russians and Ukrainians.

Germany said it was suspending a major arms deal with Moscow – a signal that Europe is willing to take more serious punitive steps against the Kremlin despite their heavy dependence on Russian energy supplies.

Washington said it was also planning further sanctions on Moscow, highlighting that the intervention in Crimea had caused Russia "real economic pain".

"The question at this point is not if we will do more sanctions, it's when," State Department spokeswoman Jen Psaki told reporters, adding that more capital had fled Russia this year than in all of 2013.

But Russia's Deputy Foreign Minister Sergei Ryabkov warned Washington that Moscow was preparing an entire series of "asymmetrical measures" should the United States hit his country with more severe steps.

Ryabkov said these measures covered "a number of areas of dialogue... that are important to the Americans" and hinted that Russia could "raise the stakes" in the ongoing Iranian nuclear talks.

United Nations chief Ban Ki-moon will meet with Putin in Moscow on Thursday before holding talks with Ukraine's interim leaders in Kiev on Friday to encourage a peaceful resolution of the crisis.

As the West mulls ways to further isolate Russia, British Prime Minister David Cameron urged Russia's permanent expulsion from the wider G8 political grouping to which Moscow was accepted in 1998 as its reward for pursuing a democratic course.

Moscow's 'wider strategy'

Pro-Russian forces earlier seized two Crimean navy bases and detained Ukraine's naval chief, sending dozens of despondent Ukrainian soldiers – one of them in tears – fleeing.

Russian Defence Minister Sergei Shoigu later urged Crimea's pro-Russian leaders to free the naval head Gayduk, but only after the expiry of a 9:00 pm (1900 GMT) deadline set by Turchynov for the Crimean authorities to release the commander.

Ukraine's National Security and Defence Council chief Andriy Parubiy said Ukraine was developing a contingency plan to withdraw Crimean servicemen and their family members "so that they could be quickly and efficiently moved to mainland Ukraine".

The greatest fear facing Kiev's new leaders and the West is that Putin will push huge forces massed along the Ukrainian border into the Russian-speaking southeastern swathes of the country in a self-professed effort to "protect" compatriots he claims are coming under attack from violent ultra-nationalists.

"We are not speaking about military actions in the eastern regions of Ukraine," Putin's spokesman Dmitry Peskov told the BBC.

"But Russia will do whatever is possible... to protect and to extend a hand of help to Russians living in eastern regions of Ukraine."

The head of NATO said the alliance was acutely worried that the crisis reflected a wider "strategy" by Moscow to exert control in the region.