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A treaty signed in 1994 by the US and Britain could pull both countries into a war to protect Ukraine if President Putin's troops cross into the country.
Bill Clinton, John Major, Boris Yeltsin and Leonid Kuchma – the then-rulers of the USA, UK, Russia and Ukraine - agreed to the The Budapest Memorandum as part of the denuclearization of former Soviet republics after the dissolution of the Soviet Union.
Technically it means that if Russia has invaded Ukraine then it would be difficult for the US and Britain to avoid going to war.
The revelation comes as reports suggest the Kremlin was moving up to 2,000 troops across the Black Sea from Novorossiysk to their fleet base at Sevastopol.
At least 20 men wearing the uniform of the Russian fleet and carrying automatic rifles surrounded a Ukrainian border guard post in a standoff near the port yesterday.
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The Budapest Memorandum was signed in 1991 by Bill Clinton, John Major, Boris Yeltsin and Leonid Kuchma - the then-rulers of the USA, UK, Russia and Ukraine. It promises to protect Ukraine's borders, in return for Ukraine giving up its nuclear weapons
Last night it was still unclear the exact scale of Russian boots on the ground in Crimea or the identity of gunmen who have taken over airports in Simferopol and Sevastopol – though reports suggest they are Russian marines or Moscow- controlled militias.
The action came as President Obama delivered blunt warnings to Moscow.
'We are now deeply concerned by reports of military movements taken by the Russian Federation inside of Ukraine,' he told reporters at the White House.
'Any violation of Ukraine's sovereignty and territorial integrity would be deeply destabilizing,' he said in a brief appearance.
'The United States will stand with the international community in affirming that there will be costs for any military intervention in Ukraine.'
U.S. officials also said the President could scrap plans to attend an international summit in Russia and take negotiations on deepening trade ties with the country off the table in response to Russian involvement in the Ukraine.
Defense Secretary Chuck Hagel added: "This could be a very dangerous situation if this continues in a provocative way."
Asked about options in a CBS News interview, he said that "We're trying to deal with a diplomatic focus, that's the appropriate, responsible approach."
Both the U.S. and the UK are advising against all non-essential trips to Ukraine - especially Crimea.
former British Ambassador to Moscow Sir Tony Brenton, who served as British Ambassador from 2004 to 2008, said in an interview that war could be an option 'if we do conclude the [Budapest] Memorandum is legally binding.'
NATO also asked Russia not to take action that could escalate tension. However Moscow responded by telling the organization to 'refrain' from provocative statements on Ukraine and respect its 'non-bloc' status.
Sir Tony Brenton, who served as British Ambassador from 2004 to 2008, said that war could be an option 'if we do conclude the [Budapest] Memorandum is legally binding.'
It promises to protect Ukraine's borders, in return for Ukraine giving up its nuclear weapons.
Kiev has demanded the agreement is activated after insisting their borders had been violated.
In response Mr Brenton said in a BBC radio interview: 'If indeed this is a Russian invasion of Crimea and if we do conclude the [Budapest] Memorandum is legally binding then it's very difficult to avoid the conclusion that we're going to go to war with Russia'.
Ukraine accused Russia of a 'military invasion and occupation', saying Russian troops have taken up positions around a coast guard base and two airports on its strategic Crimea peninsula.
Russia kept silent on the accusations, as the crisis deepened between two of Europe's largest countries.
Any Russian military incursion in Crimea would dramatically raise the stakes in Ukraine's conflict, which saw pro-Russian President Viktor Yanukovych flee last weekend after three months of anti-government protests. Yanukovych vowed Friday at a news conference in Russia to 'keep fighting for the future of Ukraine,' though he called any military action 'unacceptable.'
Moscow has vowed to protect Russian-speaking Ukrainians in Crimea, where it has a major naval base, and Ukraine and the West have warned Russia to stay away.
Russia did not confirm its troops were involved in Friday's action in Crimea, which would be a major escalation.
In Kiev, Ukraine's parliament adopted a resolution demanding that Russia halt steps it says are aimed against Ukraine's sovereignty and territorial integrity, and called for a U.N. Security Council meeting on the crisis.
Budapest Memorandum on Security Assurances was a international treaty signed on February, 5, 1994, in Budapest.
The diplomatic document saw signatories make promises to each other as part of the denuclearization of former Soviet republics after the dissolution of the Soviet Union.
It was signed by Bill Clinton, John Major, Boris Yeltsin and Leonid Kuchma – the then-rulers of the USA, UK, Russia and Ukraine.
The agreement promises to protest Ukraine's borders in return for Ukraine giving up its nuclear weapons.
It is not a formal treaty, but rather, a diplomatic document.
It was an unprecedented case in contemporary international life and international law.
Whether is it legally binding in complex.
'It is binding in international law, but that doesn't mean it has any means of enforcement,' says Barry Kellman is a professor of law and director of the International Weapons Control Center at DePaul University's College of Law told Radio Free Europe.
'I can only describe this as a military invasion and occupation,' Ukraine's newly named interior minister, Arsen Avakov, wrote in a Facebook post.
The chief of Ukraine's security council, Andriy Parubiy, seemed to strike a less strident tone later in the day, saying gunmen had tried to 'seize' the airports in the Crimean cities of Simferopol and Sevastopol but insisting in comments to the Interfax news agency that 'de-facto the airports are controlled by the law enforcement bodies of Ukraine.'
Ukraine's State Border Guard Service also said about 30 Russian marines from Russia's Black Sea Fleet - which is based in Sevastopol - had taken up position outside the Ukrainian Coast Guard base in the area. It said the marines said they were there to prevent any weapons at the base from being seized by extremists.
Russia's defense ministry had no comment.
Yanukovych made his first public appearance since fleeing Ukraine in the southern Russian city of Rostov-on-Don, not far from the Ukrainian border. It was the first confirmation that he had left the country, and he said he was 'forced' to do so only after his family received threats.
'I intend to keep fighting for the future of Ukraine,' he said.
Yanukovych said he supports Crimea's residents who are worried about 'nationalists' in Kiev and added that Russia cannot stand by while events in Ukraine unfold. He denied, however, that this amounts to a call for military intervention.
'Any military action in this situation is unacceptable,' he said.
Tensions rising: A Russian soldier on an armoured personnel carrier halted on a road in Ukraine around 20 miles from Sebastapol, where there is a large Russian military presence
Armed Russian navy servicemen surround a Ukrainian border guard base in Balaclava, in the Crimea region
An armed Ukrainian border guard looks out of a window as the base is surrounded by armed Russian navy servicemen in Balaclava
The prosecutor-general's office in Kiev said it would seek Yanukovych's extradition to Ukraine, where he is wanted on suspicion of mass murder in last week's violent clashes between protesters and police, during which over 80 people were killed.
Associated Press journalists approaching the Sevastopol airport found the road leading up to it blocked by two military trucks and a handful of gunmen wearing camouflage uniforms and carrying assault rifles.
A car with Russian military plates was stopped at the roadblock. A man wearing a military uniform with a Russian flag on his sleeve got out of the car and was allowed to enter on foot after a brief discussion with the gunmen.
At the airport serving Simferopol, commercial flights were landing and taking off despite dozens of armed men in military uniforms without markings patrolling with assault rifles. They didn't stop or search people leaving or entering the airport, and refused to talk to journalists.
One man who identified himself only as Vladimir said the men were part of the Crimean People's Brigade, which he described as a self-defense unit ensuring that no 'radicals and fascists' arrive from other parts of Ukraine. There was no way to verify his account.
The airport deployments came a day after masked gunmen with rocket-propelled grenades and sniper rifles seized the parliament and government offices in Simferopol and raised the Russian flag. Ukrainian police cordoned off the area but didn't confront the gunmen. They remained in control of the buildings Friday.
The Russian foreign and defense ministries had no comment. Russia's state RIA Novosti and Interfax cited an unnamed official from the Russian Black Sea Fleet denying involvement, saying Russian servicemen stationed in Crimea have not moved into the airports and denying that the Russian military was in control there.
Tensions between the two countries were high, however. Russia continued with massive combat readiness exercises involving most of its troops in western and southern Russia that it said were unrelated to the Ukraine conflict. The moves were reminiscent of Cold War brinksmanship.
Russian military forces are blockading an airport in the Black Sea port of Sevastopol in Crimea, an act Ukraine's new interior minister has announced branded an 'armed invasion'
As events in the Crimea region heighten tensions with neighboring Russia, this morning armed men also took over the other main Crimean airport, Simferopol, according to a Facebook post by Mr Avakov
Dozens of armed men in military uniforms without markings were seen patrolling the airport in Simferopol, the capital of Crimea
The move came as U.S. Vice President Joe Biden told Ukraine's new prime minister that the U.S. welcomes the formation of the country's new government
The Kremlin, in a statement published late Thursday, said President Vladimir Putin had instructed the government to 'maintain contacts with the counterparts in Kiev in what concerns trade and economic ties between Russia and Ukraine.'
Moscow has been sending mixed signals about Ukraine but pledged to respect its territorial integrity. Putin has long dreamed of pulling Ukraine, a country of 46 million people considered the cradle of Russian civilization, closer into Moscow's orbit.
Meanwhile, Swiss prosecutors announced they had launched a criminal investigation against Yanukovych and his son Aleksander over 'aggravated money laundering.'
They said police and Geneva's chief prosecutor conducted a search and seized documents Thursday at the premises of a company owned by Aleksander Yanukovych.
Ukraine's ex-President Yanukovych has made his first public appearance since being ousted, telling a news conference that he was going to fight for his country's future
Switzerland and Austria both said they would freeze any assets Yanukovych and his entourage might have in those countries.
Ukraine's population is divided in loyalties between Russia and the West, with much of western Ukraine advocating closer ties with the European Union while eastern and southern regions look to Russia for support.
Crimea, a southeastern peninsula of Ukraine that has semi-autonomous status, was seized by Russian forces in the 18th century under Catherine the Great, and was once the crown jewel in Russian and then Soviet empires.
It became part of Ukraine in 1954 when Soviet leader Nikita Khrushchev transferred jurisdiction from Russia, a move that was a mere formality until the 1991 Soviet collapse meant Crimea landed in an independent Ukraine.
In a bid to shore up Ukraine's fledgling administration, the International Monetary Fund has said it is 'ready to respond' to Ukraine's bid for financial assistance; Ukraine's finance ministry has said it needs $35 billion over the next two years to avoid default.
The European Union is also considering emergency loans for a country that is the chief conduit of Russian natural gas to western Europe.
And Putin, in his statement, asked his government to 'hold consultations with foreign partners including the IMF and the G8 nations to provide financial aid to Ukraine.'
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