Putin said he saw no need to further retaliate against US sanctions, a newly conciliatory tone that apparently aimed to contain one of the worst crises in Russia's relations with the West since the Cold War. However, the Russian Foreign Ministry said a few hours later that Moscow will "harshly" respond to the latest round of US sanctions — the conflicting signals apparently intended to persuade the West to end the spat over Ukraine.
Read: Ukraine crisis shakes up geopolitical ties
Russian stocks down as banks suffer amid sanctions
At Ukrainian bases on the peninsula, troops hesitated, besieged by Russian forces and awaiting orders. Russia claimed some had already switched sides and agreed to join the Russian military. Friday had been the deadline for Ukrainian troops to leave Crimea, join the Russian military or demobilize.
Russia rushed the annexation of the strategic peninsula after residents there voted in a hastily called referendum Sunday to leave Ukraine and join Russia. Ukraine and the West have rejected the vote, saying it was held at gunpoint since Russian troops had seized control of Crimea two weeks earlier. The U.S. and EU have responded to the crisis by slapping sanctions on Russia.
Putin hailed the incorporation of Crimea into Russia as a "remarkable event" before he signed the parliament bills into law Friday in the Kremlin. He also ordered fireworks in Moscow and Crimea.
Read: Ukraine nationalist antics seen as gift to Russia
At nearly the same time in a ceremony in Brussels, Ukraine's new prime minister pulled his nation closer to Europe by signing a political association agreement with the European Union. It was the same deal that touched off Ukraine's political crisis, the deal that President Viktor Yanukovych rejected in November, igniting the months of protests that drove him from office and sent him fleeing to Russia.
Read: Russia's Upper House approves Crimea annexation
"Russia decided to actually impose a new post-Cold War order and revise the results of the Second World War," Ukrainian Prime Minister Arseniy Yatsenyuk said in Brussels. "The best way to contain Russia is to impose real economic leverage over them."
President Barack Obama on Thursday ordered a second round of sanctions against nearly two dozen members of Putin's inner circle and a major bank supporting them.
Moscow retaliated by banning nine U.S. officials and lawmakers from entering Russia, but Putin indicated that Russia would likely refrain from curtailing cooperation in areas such as Afghanistan. Moscow appears to hope to limit the damage.
But the latest U.S. sanctions, which targeted Putin's chief of staff along with other senior Kremlin aides and four businessmen considered to be his lifelong friends, dealt a painful blow to Russia. Obama also warned that more sweeping penalties against Russia's economy, including its robust energy sector, could follow.
Read: Russian stocks down as banks suffer amid sanctions
International rating agencies downgraded Russia's outlook and Russian stocks tumbled Friday.
"The economic impact of the sanctions is already visible — on the stock exchange, the value of the Ruble, the investment climate," EU President Herman Van Rompuy told VRT network.
The EU on Friday added 12 more people to bring its list of those facing visa ban and asset freeze sanctions to 33. According to a document obtained on Friday by the Associated Press, the list included some of Russian officials and lawmakers targeted by the first round of U.S. sanctions Monday.
Beyond the targeting of officials linked to the annexation of the Crimea Peninsula, the EU leaders also decided at their summit to prepare economic sanction in case the situation in eastern Ukraine would deteriorate further.
Putin tried to play down the sanctions' toll on Russia at Friday's televised session of the presidential Security Council.
"We should keep our distance from those people who compromise us," he said, a jocular reference to the officials on the sanctions list, some of whom attended the meeting.
Putin added sardonically that he would open an account to keep his salary in the targeted Bank Rossiya, a private bank that is owned by Yuri Kovalchuk, considered to be Putin's longtime friend and banker. With about $10 billion in assets, Rossiya ranks as the 17th-largest bank in Russia and maintains numerous ties to banks in the United States, Europe and elsewhere.
At the same time, Putin said he sees no immediate need for further Russian retaliation to the U.S. sanction.
"We must refrain from retaliatory steps for now," Putin said.
He said Russia will keep funding a program to service Afghan helicopters and train their crews that has been conducted jointly with NATO.
Russia is expected to play a major role in the planned withdrawal of U.S. and other NATO forces from Afghanistan later this year by providing transit corridors via its territory, and Putin seemed to indicate that the Kremlin at this stage has no intentions of shutting the route.
But a few hours later, the Russian Foreign Ministry said Moscow will "respond harshly" to the second round of U.S. sanctions and Putin's spokesman, Dmitry Peskov, also said that Russia would retaliate.
"We will react every time. We responded to the first round of sanctions, and we will respond to those too," he said, according to the ITAR-Tass news agency.
The contradictory messages were highly unusual, and seemed to convey a Kremlin warning to the West to make a deal or face Russia's retaliation.
Moscow also appeared to be warming to the deployment of monitors from the Organization for Security and Cooperation in Europe, the top trans-Atlantic security and rights group.
Foreign Minister Sergey Lavrov said Russia would welcome sending the OSCE observers to Russian-speaking regions in eastern Ukraine on condition that their number and locations are clearly set, but he made it clear that they wouldn't be let into Crimea.
In Crimea, heavily armed Russian forces and pro-Russia militia have blocked Ukrainian military at their bases for weeks. Following Sunday's referendum they have moved aggressively to flush the Ukrainians out, storming some ships and military facilities.
The Ukrainian government said it was drawing up plans to evacuate its outnumbered troops from Crimea. But at the Ukrainian military air base in Belbek, outside Sevastopol, Col. Yuly Mamchur told reporters Friday he was still waiting for orders from his commanders on whether to vacate.
Russian Defense Minister Sergei Shoigu on Friday told Putin that 72 Ukrainian military units in Crimea have decided to join the Russian military. His claim couldn't be independently confirmed.
Amid its political crisis, Ukraine is teetering on the verge of bankruptcy, struggling to pay off billions of dollars in debts in the coming months. The U.S. and the European Union have pledged to quickly offer a bailout.
It owes Russia $2 billion in overdue payments for natural gas supplies. Putin made it clear that Russia will further raise the heat on Ukraine by urging it to pay back a $3 billion bailout loan granted to Yanukovych in December.