The pro-European team in Kiev that rode the wave of three months of deadly protests to topple a Kremlin-backed regime is running against the clock to preserve the territorial integrity of the culturally splintered nation of 46 million.
The self-declared leadership on the predominantly ethnic Russian peninsula of Crimea has proclaimed independence from Kiev and set a March 16 referendum on switching over to Kremlin rule.
The decision has been condemned by Western powers who are also furious at Moscow's seizure of Crimea in a lightning but bloodless operation that began days after the February 22 fall and subsequent escape to Russia of president Viktor Yanukovych.
German Chancellor Angela Merkel -- whose cautious approach to imposing sanctions on Russia has clashed with the more hawkish positions of Eastern European nations and the United States -- bluntly told Putin on Sunday that the Crimean referendum was "illegal".
The most explosive East-West crisis since the Cold War was stoked further when the Kremlin said Putin told both Merkel and British Prime Minister David Cameron that he fully recognised the actions of the Crimean leaders -- in power since an end of February seizure of the local parliament and government by pro-Kremlin gunmen.
The Kremlin said Putin stressed "the steps undertaken by the legitimate authorities of Crimea are based on the norms of international law" -- a comment hinting strongly that the Kremlin was ready to annex Crimea after handing the peninsula as a "gift" to Ukraine when it was a part of the Soviet empire in 1954.
But Merkel's office also said Putin had promised to discuss with Russian Foreign Minister Sergei Lavrov on Monday the creation of an "international contact group" on Ukraine that he had resisted in the past.
Germany is pushing the group's creation as a way of avoiding an all-out war breaking out on the eastern edge of Europe that would see Ukraine call for Western help against its nuclear-armed neighbor.
The embryonic sign of diplomatic progress came as Ukrainian Prime Minister Arseniy Yatsenyuk prepared to fly to Washington for his first meeting with US President Barack Obama -- pushing a peace plan that includes support for Ukrainian presidential elections on May 25.
Wednesday's meeting will both boost the credibility of Yatsenyuk's untested government -- not recognised by Russia -- and provide Ukraine with a chance to iron out the details of crucial economic relief for its wheezing economy.
"This is a very important visit," Ukraine's interim Foreign Minister Andriy Deshchytsya told Kiev's 1+1 television late on Sunday.
"We hope that during these negotiations, we will find joint approaches to solving the situation around Crimea."
Deshchytsya -- who had earlier confirmed that Ukrainian troops in Crimea were under orders not to open fire on or be provoked by the pro-Kremlin militia who have overrun the peninsula - -- said Kiev was pushing hard for a "peaceful solution".
The White House said Yatsenyuk's visit would "highlight the strong support of the United States for the people of Ukraine" in the face of the "ongoing military intervention in Crimea."
It added that Obama will discuss an economic support package that so far has seen Washington pledge a quick infusion of more than $1 billion and the European Union promise to deliver 11 billion euros ($15 billion).
Ukraine says it needs about 25 billion euros ($35 billion) in assistance over two years to keep the country running after Russia froze a $15 billion package it promised Yanukovych as his reward for rejecting an historic EU trade deal in November.
Yanukovych's shock decision sparked the Kiev protests in which 100 died -- most of them in days of carnage preceding the pro-Moscow regime's fall.
Deshchytsya said on Sunday that Kiev hoped to sign parts of the rejected Association Agreement at either a meeting of EU foreign ministers on March 17 or a summit of the bloc's 28 leaders on March 20-21.
Russian flags in east Ukraine
The escalating standoff has seen Obama vow to impose visa bans and asset freeze on Russia officials held responsible for endangering the territorial integrity of Ukraine.
US officials have stressed that Putin himself is not on that list but also warn that Washington could pull out of a G8 summit the Russian leader is hosting in Sochi in June.
The European Union for its part has halted visa talks and threatened to impose tough economic sanctions unless Putin quickly opens talks with the Kiev team.
The Kremlin blames the new Ukrainian rulers for having fomented an atmosphere of intimidation against ethnic Russians in the eastern and southern swathes of Europe's largest country that prompted Putin to threaten to use force on March 1.
Ukraine on Sunday was hit by rival protests that saw pro-Kremlin separatists seize the regional seat of power in the eastern city of Luhansk and raise the Russian flag on the local security forces' headquarters in Yanukovych's native region of Donetsk.
Pro-Moscow militants wearing balaclavas and bullet-proof vests -- joined by Cossacks wielding whips -- also attacked a small rally for Ukrainian unity in the Crimean naval port city of Sevastopol that has housed Russia's Black Sea Fleet since the 18th century.