Russian president Vladimir Putin has signed laws completing his country's annexation of Crimea, as investors take fright at a United States decision to slap sanctions on his inner circle of money men and security officials.

Mr Putin promised to protect a bank partly owned by an old ally, which Washington has blacklisted, and his spokesman said Russia would respond in kind to the financial and visa curbs.

Russian shares fell sharply after US president Barack Obama threatened to target major sectors of the economy if Moscow tried to move on other areas of Ukraine beyond the Black Sea peninsula.

Europe also tightened the screws by widening its sanctions list and Germany suspended approval of all defence-related exports to Russia, ordering defence contractor Rheinmetall to halt delivery of combat simulation gear.

France suspended military cooperation with Moscow.

In a Kremlin ceremony shown live on state television, Mr Putin signed a law on ratification of a treaty making Crimea part of Russia, as well as legislation creating two new Russian administrative districts: Crimea and the port city of Sevastopol, where Moscow keeps part of its Black Sea fleet.

Politicians and officials in Moscow have largely laughed off Western sanctions imposed after Russian troops seized control of Crimea.

A referendum in the majority Russian-speaking region - which overwhelmingly backed union with Russia but was denounced by Washington and the European Union as a sham - opened the way for the annexation.

Mr Obama's decision to go for the financial jugular of the people who accompanied Mr Putin's rise from the mayor's office in St Petersburg in the 1990s to the Russian presidency has deepened the diplomatic confrontation.

Mr Putin said Bank Rossiya, singled out by Washington as the personal bank for senior Russian officials, had nothing to do with the events in Crimea and promised to keep his salary there.

The St Petersburg-based bank is chaired and partly owned by Yuri Kovalchuk, an old associate of Mr Putin's.

US blacklist includes oil traders, gas tycoons and Putin's staff

Other names on the US blacklist include oil and commodities trader Gennady Timchenko and brothers Arkady and Boris Rotenberg, who are linked to big contracts on gas pipelines and the Sochi Olympics, as well as Mr Putin's chief of staff and his deputy, the head of military intelligence and a railways chief.

Russian deputy finance minister Alexei Moiseev said he expected no big immediate impact from the sanctions.

A consortium led by Stroitransgaz, owned by Mr Timchenko, is set to win a 3.5 billion euro ($5.3 billion) deal to build a section of the South Stream natural gas pipeline across EU member Bulgaria, industry sources said.

But, underlining how Washington can apply pressure via the international financial system, US credit card companies Visa and MasterCard stopped providing services for payment transactions with Russia's SMP bank, owned by the Rotenberg brothers, the bank said.

Mr Obama said Washington was also considering sanctions against economic sectors including financial services, oil and gas, metals and mining and the defence industry, if Russia made military moves into eastern and southern Ukraine.

Diplomats said the mere mention of such a possibility would chill investment in Russia, charging an immediate price for Moscow's action in Crimea and serving as a potential deterrent to going further.

The EU also extended its personal sanctions to another 12 middle-ranking Russian and Crimean officials.

EU leaders sign political agreement with Ukraine

In Brussels, the 28 European Union leaders underlined their support for Ukraine's new leadership following the fall of Moscow-backed president Viktor Yanukovych in street protests last month.

They signed a political agreement with interim prime minister Arseniy Yatseniuk and promised financial aid for the government - rejected as illegitimate by Moscow - as soon as Kiev reaches a deal with the International Monetary Fund (IMF).

The IMF is to report next Tuesday on advanced talks with Ukraine on a loan program that would be linked to far-reaching reforms of the shattered economy.

An East-West tug-of-war has grown over Ukraine.

The EU leaders agreed to impose asset freezes and visa bans on 12 more mid-ranking Russian and Crimean officials and to consider wider economic sanctions if Russia further destabilises the situation in Ukraine.

But they said Europe did not have a legal basis to extend the personal sanctions against Mr Putin's associates without proof of their direct involvement in the violation of Ukrainian sovereignty.

"Small measures in the EU are worth more than big measures in the United States," a senior European official said, noting that EU trade with Moscow was 10 times the US volume.

"It's about cutting off Russia politically and diplomatically," the official said, dismissing criticism that EU sanctions looked weaker than the US measures.

In one glimmer of diplomatic progress, Russian foreign minister Sergei Lavrov said an agreement was near on sending a monitoring mission by the pan-European OSCE security watchdog.

The EU had threatened to send its own monitors if Moscow continued to block a mandate at the Organisation for Security and Cooperation in Europe.

Reuters