A Russian serviceman standing behind pro-Russian activists at the Belbek Sevastopol International Airport in the Crimea region yesterday.

President Vladimir Putin delivered a robust defence of Russia’s actions in Crimea yesterday and said he would use force in Ukraine only as a last resort, easing market fears that East-West tension over the former Soviet republic could lead to war.

But tension remained high on the ground, with Russian forces firing warning shots in a confrontation with Ukrainian servicemen, and Russian navy ships were reported to have blockaded the strait separating the Ukrainian Black Sea peninsula from Russia.

At his first news conference since the crisis began, Putin said Russia reserved the right to use all options to protect compatriots who were living in “terror” in Ukraine, but force was not needed for now.

His comments lifted Russian bonds and stock markets around the world after a panic sell-off on Monday.

Not a single piece of credible evidence supports these claims

Putin denied the Russian armed forces were directly engaged in the bloodless seizure of Crimea, saying the uniformed troops without national insignia were “local self-defence forces”.

Western sanctions under consideration against Russia would be counter-productive, he warned. A senior US official said Washington was ready to impose them in days.

US Secretary of State John Kerry made his first visit to Kiev since the overthrow of Russian-backed President Victor Yanukovych, describing the experience as “moving, distressing and inspiring”.

Kerry laid flowers in Independence Square at a memorial to pro-Western protesters killed by police last month, met the country’s interim leaders and announced a $1 billion economic package and technical assistance for the new government.

Putin said there had been an unconstitutional coup in Ukraine, and Yanukovych, 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.

Kerry dismissed the Russian leader’s account of events, telling a news conference in Kiev: “Not a single piece of credible evidence supports these claims.”

He accused Moscow of invading Crimea in an act of aggression against Ukraine but said the United States was not seeking a confrontation and would prefer to see the situation managed through international institutions.

Ukrainian Prime Minister Arseny Yatseniuk told reporters in Kiev that the Ukrainian and Russian governments had begun consultations on the crisis “at the level of ministers”. He gave no details.

The February 22 ousting of Yanukovych after months of street protests in Kiev and Russia’s seizure of control in Crimea 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.

Earlier yesterday, 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 in Crimea, a Russian soldier fired three volleys of shots over the heads of Ukrainian servicemen 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 dispersed. No one was hurt.

The Ukrainian border guard service said Russian navy ships had blocked both ends of the Kerch Strait between Crimea and Russia, but Ukraine’s Infrastructure Ministry said the 4.5-kilometre wide waterway was still open for civilian shipping.

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.