A man holds a Soviet Union flag as he attends a pro-Russian rally at the Crimean parliament building in Simferopol March 6, 2014
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.
U.S. President Barack Obama took the 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 crisis in Ukraine 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 recognize the new Ukrainian authorities.
The Crimean parliament voted unanimously 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 "nationalized", the Russian ruble adopted and Ukrainian troops treated as occupiers and forced to surrender or leave, he said.
A Crimean parliament official said voters in the region of two million people will be asked two questions: should Crimea be part of the Russian Federation and should Crimea return to an earlier constitution (1992) that gave the region more autonomy?
Russian stocks fell and the ruble weakened further after the news. Moody's ratings agency said the stand-off was negative for Russia's sovereign creditworthiness.
Russia said it would make it easier to give passports to native Russian speakers who have lived in Russia or the former Soviet Union. Putin has cited threats to Russian citizens to justify military action in Georgia in 2008 and now in Ukraine.
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 traveled from the port of Odessa, Poland's defense minister said.
FACTS ON THE GROUND
Far from seeking a diplomatic way out of the crisis, Putin appears to have chosen to create facts on the ground before the West can agree on more than token action against him.
EU leaders had been set to warn but not sanction Russia over its military intervention after Moscow rebuffed Western diplomatic efforts to persuade it to pull forces in Crimea back to their bases.
French President Francois Hollande told reporters on arrival at the summit: "There will be the strongest possible pressure on Russia to begin lowering the tension and in the pressure there is, of course, eventual recourse to sanctions."
The new Ukrainian government declared the referendum illegal and opened a criminal investigation against Crimean Prime Minister Sergei Askyonov, who was appointed in a closed session by the region's parliament last week.
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, met U.S. Secretary of State John Kerry in Rome, their third encounter in two days, but said afterwards there was no agreement for now.
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.
The EU summit in Brussels however seemed unlikely to adopt more than symbolic measures against Russia, Europe's biggest gas supplier, because neither industrial powerhouse Germany nor financial center Britain is keen to start down that road.
The short, informal EU summit was mostly be dedicated to displaying support for Ukraine's new pro-Western government, with Yatseniuk in attendance even though Kiev is neither an EU member nor a recognized candidate for membership.
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.
Diplomats said that at most, the EU would condemn Russia's so far bloodless seizure of Crimea and suspend talks with Moscow on visa liberalization and economic cooperation, while threatening further measures if Putin does not accept mediation efforts soon.
They were expected to hold back from tougher steps both in hopes of a diplomatic breakthrough and out of fear of a tit-for-tat trade war with Russia, a major economic partner of Europe.
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.
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.
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 favor 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.