Vladimir Putin is confident Russia's takeover of the Crimean peninsula – where 16,000 pro-Russian troops are in control of the region's security and administrative infrastructure – will not descend into war.
During a live address on Russian television, the president insisted that the armed forces of Russia and Ukraine were "brothers in arms".
"We will not go to war with the Ukrainian people. If we do take military action, it will only be for the protection of the Ukrainian people,"said Putin, adding that there was no scenario in which Russian troops would fire "on women and children".
The Russian president continued: "Ukraine is not only our closest neighbour it is our fraternal neighbour. Our armed forces are brothers in arms, friends. They know each other personally. I'm sure Ukrainian and Russian military will not be on different sides of the barricades but on the same side. Unity is happening now in the Ukraine, where not a single shot has been fired, except in occasional scuffles."
Putin denied that the Russian-speaking soldiers occupying key Crimean military sites were Russian special forces, describing them as pro-Russian local self-defence forces.
"There are many military uniforms. Go into any local shop and you can find one," he said.
Putin was speaking shortly after gunfire rang out at the Belbek airbase in the Crimean peninsula, where a standoff between pro-Russian and Ukrainian soldiers threatened to erupt in clashes.
Warning shots were fired in the air by more than a dozen pro-Russian troops, who had taken over the military site, after about 300 Ukrainian troops marched towards them.
Putin also insisted that ousted Ukrainian leader, Viktor Yanukovych, was the legitimate leader of Ukraine and that the "so-called" acting president had no authority and the new government in Kiev illegal.
Putin gave his address as US secretary of state was due to arrive in Kiev to hold crisis talks with the new Ukrainian government, hours after Washington suspended all military engagements with Russia, including exercises and port visits, in response to Moscow sending troops into Crimea.
Responding to journalists' questions on the US position and Kerry's involvement, Putin said: "The secretary of state is important but he does not determine the policy of the United States. I am hearing many different things."
Barack Obama had warned that the US government would look at economic and diplomatic sanctions that would isolate Moscow over Russia's involvement in the Ukraine crisis. The US also put on hold trade and investment talks with Russia.
Referring to these threats from the White House, and other western leaders to eject Russia from the G8 ahead of looming talks, the president said calmly that he was still preparing for the talks: "If the leaders don't want to come, fair enough."
During his impromptu and occasionally rambling address, Putin said he had advised Yanukovych not to dismiss the feared Ukrainian riot police from Kiev, warning the ousted leader that "chaos, anarchy" would ensue if he did. Putin marked the beginning of the "chaos that reigns today" with Yanukovych's dismissal of these forces.
"Yanukovych has no political future now, I have told him that," Putin said.
Earlier on Tuesday, the Kremlin ordered Russian troops carrying out exercises near Ukraine's eastern border to return to their barracks.
Russia's invasion of Ukraine's Crimean region has so far been bloodless despite tense standoffs and threats from both sides. A supposed Russian ultimatum for two Ukrainian warships to surrender passed without action from either side on Tuesday morning.
The warships remained anchored in the Crimean port of Sevastopol early on Tuesday, a day after Ukrainian authorities claimed that Russian forces had issued an ultimatum for the ships to surrender or be seized. Russian defence ministry spokesman Vladimir Anikin said on Monday that no ultimatum had been issued.
Russia's ambassador to the UN claimed on Monday that Yanukovych had requested that Russian soldiers be sent to Crimea "to establish legitimacy, peace, law and order".
Vitaly Churkin told a UN security council meeting that Yanukovych wrote to Vladimir Putin on Saturday.
France's ambassador to the UN, Gérard Araud, said the letter was just a piece of paper handed to Yanukovych that "got his signature". Asked if the letter was phony, Araud replied: "It's not a false letter, it's a false president."
Late on Monday night, a Kremlin-linked analyst and member of Russia's public chamber, who was in Crimea for talks with local officials, said he believed there would be an "escalation of pressure" on Ukrainian forces on Tuesday, but no military action.
Sergei Markov said Ukrainian troops would be reminded that "life will be difficult for them" if they remained loyal to Kiev.
Russian troops, said to be 16,000 strong, tightened their grip on the Crimean peninsula on Monday and control all Crimean border posts, as well as military facilities in the territory and a ferry terminal in the city of Kerch, just 12 miles (20km) across the water from Russia.
On Tuesday morning, Putin told troops massed along the Russian side of the Ukrainian border to return to their permanent bases after calling a snap drill last week to check their battle-readiness.
"The commander-in-chief, President Vladimir Putin, gave the order to the troops and units taking part in military exercises to return to their permanent bases," his spokesman, Dmitry Peskov, told Russian news agencies.
The drill involved army, navy and air force troops based in the central and western military districts, a vast territory that includes regions bordering Ukraine but also the Arctic.
The drill did not include any regions beyond Russia's borders such as Crimea.
The Russian defence minister, Sergei Shoigu, had said the drill would include military exercises "on Russia's borders with other countries, including Ukraine".
The drill, which was scheduled to finish on Monday, came shortly before Russian security forces began operating covertly in Crimea and Putin gained parliamentary approval for military intervention.
Moscow has insisted its military presence in Ukraine is essential for the protection of Russian-speakers in Crimea, threatened by the pro-European revolution in Kiev.
The disclosure of Yanukovych's support for Russian military intervention came amid fears that the Kremlin might carry out further landgrabs in pro-Russian eastern Ukraine.
Russia faced demands from almost all UN security council members to pull its troops out of Crimea and there was no support for military action from its close ally China. Several EU states, including the UK, have said they are considering economic sanctions against Russia.
A Kremlin aide said on Tuesday that if the US were to impose sanctions, Moscow could be forced to drop the dollar as a reserve currency and refuse to pay off any loans to American banks.
Sergei Glazyev, an adviser to the Kremlin – who is often used by the authorities to stake out a hardline stance but does not make policy – added that if Washington froze the accounts of Russian businesses and individuals, Moscow would recommend that all holders of US treasuries sell them.