Russia slams NATO's suspension of ties

Russia has accused NATO of succumbing to Cold War instincts after the alliance suspended all co-operation with Moscow over the Crimea crisis.

"Basic instincts of Cold War have awoken in NATO, affecting rhetoric accordingly," the official Twitter page of Russia's mission to NATO quoted envoy Alexander Grushko as saying on Wednesday.

"'The alliance is under threat!' Seems like taxpayers will have to fork out for military games," he said.

The Western alliance's Secretary General Anders Fogh Rasmussen on Tuesday said that NATO is "suspending all practical co-operation with Russia, military and civilian" over Moscow's speedy annexation of the Crimea peninsula and reported massing of troops near Ukraine's border.

Deputy Prime Minister Dmitry Rogozin derided the announcement, remarking that it was made on April Fool's Day.

"Last time (in 2008) they were freezing for three months, and thawed by December," he said, referring to Russia's short war with neighbouring Georgia.

"What can I say: it's a Cold War, so they are still freezing," he wrote on Twitter.

Moscow also threatened retaliatory action against US diplomats after US bank JP Morgan blocked a transfer of funds carried out by a Russian envoy.

Russia considered as "unacceptable, illegal and absurd the decision of JP Morgan Chase bank to block the transfer by the Russian ambassador in Astana to insurance company Sogaz," said Alexander Lukashevich, a spokesman for the Russian foreign ministry.

The move was carried out "under the pretext of anti-Russian sanctions introduced by the United States," the spokesman added.

Sogaz is linked to Russian bank Rossiya, which is on the list of companies and individuals subject to US sanctions over Moscow's move to annex Crimea.

"Washington should understand that any hostile action towards Russian diplomats is not only a gross violation of international law but also a prelude to reprisal measures that would not fail to have an impact on the work of the US embassy and consulate in Russia," he said.

"JP Morgan Chase has therefore done a disservice" to the US administration, added the spokesman.

Meanwhile, crisis-hit Ukraine has taken the first step towards granting more powers to the regions in line with Western wishes, but stopped well short of creating the federation sought by Russia.

The announcement came as Russia continued to mass tens thousands of troops along Ukraine's eastern border after a vow by President Vladimir Putin to use "any means necessary" to protect the interest of his compatriots in the neighbouring ex-Soviet state.

Ukraine's new Western-backed government said it would like to eliminate the current practice under which local governors are appointed by the president and move towards an election system.

"The main idea behind the concept is to decentralise power in the country and substantially broaden the authority of local communities," the government said in a statement published on its website.

The interim leaders in Kiev have come under intense pressure from Moscow to adopt radical constitutional reforms after their February overthrow of a pro-Kremlin regime whose rejection of closer ties with Europe sparked months of deadly unrest.

The Kremlin would like to see Ukraine transformed into a federation that allows eastern regions in the vast nation of 46 million to adopt Russian as a second state language and establish their own trade policies with Moscow.