By Matt Spetalnick and Warren Strobel
WASHINGTON (Reuters) - As Russia deepened its military intervention in Ukraine's Crimea region on Saturday, ignoring Barack Obama's stern warning, the U.S. president faced a critical test of whether Washington has the leverage or the will to get Moscow to back down.
Obama, who has avoided entanglement in global crises where possible and focused on domestic affairs, now finds himself in the midst of the most dangerous East-West standoff since the end of the Cold War.
U.S. officials have said for months they did not want Ukraine's political crisis to turn into a Washington-Moscow tug of war. But on Saturday, a week after Ukraine's Russian-backed president was ousted in a tide of popular anger, Obama's foreign policy aides rushed to craft a response to Russian President Vladimir Putin's blunt moves.
Putin's parliament gave him the authority to invade Ukraine, which he regards as part of Russia's sphere of influence and where his troops have apparently already seized the Crimea peninsula.
In what appeared to be a tough 90-minute phone call with Putin on Saturday, Obama condemned Russia's military intervention in Ukraine and warned that it could face further political and economic isolation, the White House said. Obama told the Russian leader that Washington was suspending participation in meetings to prepare for this summer's G-8 meetings in Sochi, Russia.
But Putin had brushed aside Obama's threat on Friday that "there will be costs" for any use of force in Ukraine. The Russian leader, whom Obama once hoped to make a partner, now seems a determined adversary.
He appears to be calculating that Obama's willingness to go to the mat over Ukraine, a country few Americans know much about, does not match Russia's readiness to assert itself over a former Soviet republic with which it has close historic ties and economic interests.
Crimea, part of Russia until 1954, is Ukraine's only region with a majority ethnic Russian population, and Russia has a military presence already with the headquarters of its Black Sea Fleet.
"Even though the president doesn't want to view this as a Cold War scenario, Vladimir Putin does," U.S. Senator John McCain, an Arizona Republican and a frequent critic of Obama's foreign policy, told Reuters. "The fact that the United States has appeared weak in the world has encouraged him."
The Obama administration appears to have few other ready options to push back.
Current and former U.S. officials insist that Washington and its European allies, while they have ruled out the use of military force, can still exert pressure on Moscow by demonstrating that it has a lot to lose if it continues on its current course. That could the include the boost to its image from hosting February's Winter Olympic Games.
"Putin spent allegedly $50 billion to show off the 'New Russia' at the Sochi Olympics," said Michael McFaul, who left his post as U.S. ambassador to Moscow earlier this week. "He has to understand that all he has hoped for will be swept away if indeed there's a genuine military conflict."
The escalating crisis also raises questions about whether the White House was quick enough to recognize the seriousness of the Ukraine issue and to give it adequate attention.
U.S. officials and other sources said that the State Department, particularly the hard-charging assistant secretary of state for Europe, Victoria Nuland, had for months been raising alarms about Russia's more aggressive posture toward former Soviet states, and Ukraine in particular.
Washington's engagement accelerated after a November 2013 European summit at which Ukraine - along with Armenia - declined under heavy Russian pressure to sign association agreements with the European Union.
"That's when you saw the Americans stepping up," said Damon Wilson, executive vice president of the Washington-based Atlantic Council, and a former adviser on Europe to President George W. Bush.
Nuland, he said, "created U.S. policy really out of very little at the time."
McFaul said the Ukraine crisis was "on our radar at the highest levels" from the outset last fall and he personally acted as a bridge between the White House and State Department.
"It's important to understand the limitation of what we can and can't do, but to say we weren't paying attention is incorrect," the former ambassador, a longtime Obama confidant, told Reuters by telephone late on Friday.
Wilson praised Obama's sharper warnings to Russia on Friday. Now, he said, the United States will have to decide how deeply broader ties with Russia - already strained by differences over the Syrian civil war - have been harmed. "At what point does this disagreement become so significant that it bleeds over into other issues?"
SEVERE CRISIS, FEW OPTIONS
James Collins, U.S. ambassador to Moscow from 1997-2001, said that compared with the last major crisis with Russia, its 2008 war with Georgia, "this could be even more severe in terms of poisoning Russia's relations with the Europeans and the United States."
Obama, who decided to step in front of the cameras at the White House on Friday after signs of heightened Russian military activity in Crimea, was vague in his threat of the consequences.
A senior administration official said options being considered included skipping the Sochi G8 summit in June and rejecting Russian overtures for deeper trade and commercial ties. In a statement on Saturday after Obama's phone call with Putin, the White House warned that Russia risked "greater political and economic isolation."
While it is too early to contemplate economic sanctions, "there will be a time and a place for punitive action against Russia if it in fact follows through on what appears to be happening on the ground in Crimea," McFaul said.
For the moment, Washington is still talking to Moscow at high levels. In addition to the Obama-Putin call, U.S. Defense Secretary Chuck Hagel spoke on Saturday with his Russian counterpart, the Pentagon said, adding Hagel told Sergei Shoigu that Moscow's military intervention risked an escalation that would threaten European and international security.
Asked whether some U.S. military units had been on alert over turmoil in Crimea, a U.S. official said there was no change in the U.S. military's stance and the U.S. focus was on diplomatic options.
Obama's national security team met to discuss policy options on Saturday, a senior Obama administration official said.
AID TO UKRAINE
Along with troops, Putin has made clear he is prepared to pour money into Ukraine to pull it closer to Russia's orbit.
The European Union, United States and International Monetary Fund are all considering monetary support to Ukraine's new government, with promises of much larger IMF help if Ukraine implements economic reforms after its elections in May.
There is concern in Washington whether funds will be delivered fast enough to prop up Ukraine's troubled economy. Pressure is building on Capitol Hill to accelerate U.S. aid.
Obama also finds himself without a U.S. ambassador in Moscow at a critical juncture, although the Obama administration appears to be moving to rectify that.
Though McFaul's departure had been scheduled for months, Obama's national security adviser, Susan Rice, and the State Department only recently agreed on a candidate to succeed him, officials said, a sign that an announcement could come soon.
Speculation in Washington is that those under consideration include three former U.S. ambassadors to Ukraine, John Tefft, Steven Pifer and Carlos Pascual.
(Additional reporting by Phil Stewart, Steve Holland and Arshad Mohammed; Editing by Frances Kerry)