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Ukraine tensions cool a bit

BY TIM SULLIVAN AND VLADIMIR ISACHENKOV Associated Press

MOSCOW - Stepping back from the brink of war, Vladimir Putin talked tough but cooled tensions in the Ukraine crisis Tuesday, saying Russia has no intention "to fight the Ukrainian people" but reserves the right to use force.

As the Russian president held court in his personal residence, U.S. Secretary of State John Kerry met with Kiev's fledgling government and urged Putin to stand down.

"It is not appropriate to invade a country, and at the end of a barrel of a gun dictate what you are trying to achieve," Kerry said. "That is not 21st-century, G-8, major nation behavior."

Although nerves remained on edge in the Crimean Peninsula, with Russian troops firing warning shots to ward off Ukrainian soldiers, global markets jumped higher on tentative signals that the Kremlin was not seeking to escalate the conflict. Kerry brought moral support and a $1 billion aid package to a Ukraine fighting to fend off bankruptcy.

Lounging in an arm-chair before Russian tricolor flags, Putin made his first public comments since the Ukrainian president fled a week and a half ago. It was a signature Putin performance, filled with earthy language, macho swagger and sarcastic jibes, accusing the West of promoting an "unconstitutional coup" in Ukraine. At one point he compared the U.S. role to an experiment with "lab rats."

But the overall message appeared to be one of de-escalation. "It seems to me (Ukraine) is gradually stabilizing," Putin said. "We have no enemies in Ukraine. Ukraine is a friendly state."

Still, he tempered those comments by warning that Russia was willing to use "all means at our disposal" to protect ethnic Russians in the country.

Significantly, Russia agreed to a NATO request to hold a special meeting to discuss Ukraine on Wednesday in Brussels, opening up a possible diplomatic channel in a conflict that still holds monumental hazards and uncertainties. At the same time, the U.S. and 14 other nations formed a military observer mission to monitor the tense Crimea region, and the team was headed there in 24 hours.

While the threat of military confrontation retreated somewhat, both sides ramped up economic feuding. Russia hit its nearly broke neighbor with a termination of discounts on natural gas, while the U.S. announced a $1 billion aid package in energy subsidies to Ukraine.

"We are going to do our best. We are going to try very hard," Kerry said upon arriving in Kiev. "We hope Russia will respect the election that you are going to have."

Kerry also made a pointed distinction between the Ukrainian government and Putin's.

"The contrast really could not be clearer: determined Ukrainians demonstrating strength through unity, and the Russian government out of excuses, hiding its hand behind falsehoods, intimidation and provocations. In the hearts of Ukrainians and the eyes of the world, there is nothing strong about what Russia is doing."

The penalties proposed against Russia, he added, are "not something we are seeking to do. It is something Russia is pushing us to do."

World markets, which slumped the previous day, clawed back a large chunk of their losses on signs that Russia was backpedaling. Gold, the Japanese yen and U.S. treasuries - all seen as safe havens - returned some of their gains. Russia's RTS index, which fell 12 percent on Monday, rose 6.2 percent Tuesday. In the U.S., the Dow Jones industrial average closed up 1.4 percent.

Russia took over the strategic Crimean Peninsula on Saturday, placing its troops around its ferry, military bases and border posts. Two Ukrainian warships remained anchored in the Crimean port of Sevastopol, blocked from leaving by Russian ships.

The territory's enduring volatility was put in stark relief Tuesday morning: Russian troops, who had taken control of the Belbek air base, fired warning shots into the air as some 300 Ukrainian soldiers, who previously manned the airfield, demanded their jobs back.

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