Crimea's parliament voted to join Russia on Thursday and its Moscow-backed government set a referendum on the decision in 10 days, in a dramatic escalation of the crisis over the Ukrainian Black Sea peninsula.

Ukrainian Prime Minister Arseny Yatseniuk rejected the moves, saying the region was and would remain an integral part the nation.

He also said Ukraine was ready to defend itself "in case of further escalation and military intervention into Ukrainian territory by foreign forces."

The sudden acceleration of moves to bring Crimea formally under Moscow's rule came as European Union leaders held an emergency summit to come up with ways of pressuring Russia to back down and accept mediation.

Crimea has an ethnic Russian majority and has effectively been seized by Russian forces.

U.S. President Barack Obama took the first steps to punish Russians and Ukrainians involved in what he called "threatening the sovereignty and territorial integrity of Ukraine," ordering the freezing of their U.S. assets and a ban on travel to the United States.

Obama also declared the referendum a violation of both Ukraine's constitution and international law. 

"We are well beyond the days when borders can be redrawn over the heads of democratic leaders," he said. 

The European Union, meanwhile, suspended talks with Russia on a wide-ranging economic pact and on a visa deal Thursday, punishing Moscow for its military incursion into the Crimean Peninsula of Ukraine.

EU leaders made the announcement at an emergency summit and threatened further sanctions if Russia does not quickly engage in talks to end the crisis.

EU President Herman Van Rompuy said further measures could include travel bans, asset freezes and the cancellation of an EU-Russia summit if Moscow does not quickly end aggression and join talks to halt the crisis.

Crimea votes unanimously to join Russia

The crisis in Ukraine began in November when Ukrainian President Viktor Yanukovich, under Russian pressure, turned his back on a trade deal with the EU and accepted a $15 billion bailout from Moscow. That prompted three months of street protests leading to the overthrow of Yanukovich on Feb. 22.

Moscow denounced the events as an illegitimate coup and refused to recognize the new Ukrainian authorities.

The Crimean parliament voted unanimously on Thursday "to enter into the Russian Federation with the rights of a subject of the Russian Federation."

The decision, which diplomats said could not have been made without Putin's approval, raised the stakes in the most serious east-west confrontation since the end of the Cold War.

The vice premier of Crimea, home to Russia's Black Sea Fleet in Sevastopol, said a referendum on the status would take place on March 16. All state property would be "nationalized," the Russian rouble adopted and Ukrainian troops treated as occupiers and forced to surrender or leave, he said.

A Crimean parliament official said voters in the region of two million people will be asked two questions: should Crimea be part of the Russian Federation and should Crimea return to an earlier constitution (1992) that gave the region more autonomy?

Russian stocks fell and the rouble weakened further after the news. 

Russia said it would make it easier to give passports to native Russian speakers who have lived in Russia or the former Soviet Union. Putin has cited threats to Russian citizens to justify military action in Georgia in 2008 and now in Ukraine.

Ukraine 'ready to protect our country'

A mission of 35 unarmed military observers from the pan-European Organization for Security and Cooperation in Europe was stopped from entering Crimea by unidentified men in military fatigues when they travelled from the port of Odessa, Poland's defence minister said.

Far from seeking a diplomatic way out of the crisis, Putin appears to have chosen to create facts on the ground before the West can agree on more than token action against him.

The new Ukrainian government declared the referendum illegal and opened a criminal investigation against Crimean Prime Minister Sergei Askyonov, who was appointed in a closed session by the region's parliament last week.

CBC's Nahlah Ayed was in the Crimean capital Simferopol after the vote to join Russia. A crowd outside the region's parliament danced and chanted "Putin" after hearing the news. Read more here

Ukrainian Prime Minister Yatseniuk said after meeting EU leaders that Ukraine's armed forces would act if Russian military intervention escalated any further into Ukrainian territory. "We are ready to protect our country," he said.

Military experts say Kyiv's small and underequipped forces are no match for Moscow's superpower might.

Russian Foreign Minister Sergei Lavrov, who had refused to meet his Ukrainian counterpart on Wednesday, met U.S. Secretary of State John Kerry in Rome, their third encounter in two days, but said afterwards there was no agreement for now.

In a news briefing from Rome, Kerry had strong words for Russia, reiterating a threat to impose "tough visa restrictions" against any officials "who threaten the sovereignty and territorial integrity of Ukraine."

Kerry said defiance of international law cannot be tolerated by world leaders.

"There's no place in the community of nations for the kind aggression and steps that we have seen taken in Crimea and Ukraine in these last days," he said.

The EU said it had frozen the assets of ousted Ukrainian president Yanukovich and 17 other officials suspected of human rights violations and misuse of state funds.

The European Commission has announced aid of up to $15 billion for Ukraine over the next couple of years provided it reaches a deal with the International Monetary Fund, entailing painful reforms like ending gas subsidies.

Russia kept the door ajar for more diplomacy on its own terms, announcing on Thursday a meeting of former Soviet states, including Ukraine, for April 4.

With files from CBC News