US President Barack Obama said on Wednesday that Washington would "completely reject" any decision by Crimean voters to break from Ukraine and join the Russian Federation in Sunday's referendum.

Obama made the pledge as he welcomed Ukraine's interim prime minister, Arseniy Yatsenyuk, to the Oval Office of the White House.

Yatsenyuk, who was scheduled to address the United Nations on Thursday, declared that his country "will never surrender" in its fight to protect its territory, according to The Associated Press.

He was quoted by Russia's RIA Novosti News Agency as saying that Kiev hopes to sign the political chapters of an association agreement with the European Union next week.

A US Senate committee advanced a package of potentially tough economic sanctions against Moscow on Wednesday, the AP reported, adding pressure on Russia.

The Senate bill would authorize $1 billion in loan guarantees to Ukraine.

Obama warned that if Sunday's Crimean referendum goes ahead, Western powers "will be forced to apply a cost to Russia's violation of international law".

US Secretary of State John Kerry also struck a hawkish note. He told Congress, "It can get ugly fast if the wrong choices are made, and it can get ugly in multiple directions."

Kerry will meet Russian Foreign Minister Sergey Lavrov in London on Friday in a bid to halt the vote in Crimea, an autonomous republic in Ukraine.

German Chancellor Angela Merkel said on Thursday that Russia risked "massive" political and economic damage if it refused to change course on Ukraine.

"If Russia continues on its course of the past weeks, it will not only be a catastrophe for Ukraine," she said in a speech in Parliament, her strongest statement since the start of the crisis.

"We would not only see it, also as neighbors of Russia, as a threat. And it would not only change the European Union's relationship with Russia. No, this would also cause massive damage to Russia, economically and politically."

Army in position

A senior Russian lawmaker said military units are occupying positions in Crimea in case of armed attack from Kiev, AFP reported.

"Now there are some military units there who are occupying positions in case there is such resistance, armed aggression, armed expansion from Kiev," Leonid Slutsky, head of the State Duma's committee for relations with former Soviet republics, told Echo of Moscow radio station. He said that troops could be required if Sunday's referendum on Crimea's joining Russia prompted armed intervention from Kiev, which he said was likely.

"Therefore in this case, yes, some military units are occupying positions here, since such an incursion, unfortunately, especially in the days when the referendum is held, is highly likely," he said.

He said troops would only act in the case of an armed attack from Kiev.

Ukraine's Parliament voted unanimously on Thursday to create a new National Guard of 60,000 volunteers, which, according to RIA Novosti, would incorporate protesters who took part in violent rallies in Kiev that led to the ousting of former president Viktor Yanukovych.

The news agency said the move followed snap inspections of the nation's armed forces last week. In a report to the country's acting president Oleksandr Turchynov, Ukraine's acting defense minister Ihor Tenyukh said its combat readiness was "unsatisfactory".

Ukraine's defense chief said that only 6,000 personnel of 41,000-strong armed forces "are prepared to perform combat tasks", RIA Novosti reported.

It added that Tenyukh said the Ukrainian military's recent exercises demonstrated a "dismal degree of preparedness among servicemen and lack of military specialists, equipment and weapons".

Russia's Defense Ministry said on Thursday that about 8,500 Russian troops are engaged in military exercises involving artillery and multiple rocket launchers near the border with Ukraine.

AP - Reuters - AFP