* Russia can only deal with "legitimate" authorities
* Funding now a political decision
* Language, tone worsen in East-West battle for influence
By Elizabeth Piper
MOSCOW, Feb 20 (Reuters) - Russia warned Ukraine's president not to let opponents walk over him "like a doormat", its strongest signal yet on Thursday that Moscow wants order on the streets before handing over more cash to stave off bankruptcy.
In an increasingly bitter struggle for influence in Ukraine between Russia and the West, Moscow upped the ante by directly linking the delivery of $2 billion in loans to the end of protests, which Moscow portrays as led by dangerous extremists.
Prime Minister Dmitry Medvedev said Russia could deal only with "legitimate and effective authorities - a leadership which people aren't wiping their feet on like a doormat".
It was a powerful image of how far the Kremlin feels President Viktor Yanukovich may have dithered into losing control to crowds who have held their ground in central Kiev, driving back riot police who have taken hundreds of casualties.
Russian President Vladimir Putin's spokesman, Dmitry Peskov, put it even more bluntly - the Kremlin's priority was now conflict resolution and only after order was restored could there be "a peaceful, constructive dialogue", he told Ekho Moskvy radio.
Yanukovich on Wednesday warned Ukrainians that "advisers" were urging him to crack down and that he would end a policy of restraint if opposition leaders did not distance themselves from radical, armed elements on the streets.
Sources with close knowledge of arrangements to provide Ukraine with the second tranche of a $15 billion funding programme said the decision was now out of the Finance Ministry's hands and had become a political one.
"Given the way the situation has developed, we've put the brakes on. We've called it off for now. But that does not mean that the process cannot resume. The situation has to become clearer," a source familiar with the situation said.
"It is a political decision," another source said.
Russia promised Ukraine the $15 billion bailout and reduced gas prices in December, seen by some commentators as a reward for Yanukovich's decision to scrap plans for trade deals with the European Union.
Russia bought $3 billion worth of Ukrainian Eurobonds soon afterwards. The release of the $2-billion second tranche of the bailout had been expected by the end of this week, but the timing is now unclear.
Yanukovich's spurning of the trade and political deal with the EU marked a turn towards reviving ties with Russia, sparking protests in Kiev, where demonstrators seeking to oust Yanukovich are barricaded behind burning tyres and fighting riot police.
More than 40 people have been killed.
Russia has denied it is 'buying' the former Soviet republic with the financial aid, portraying it as an "act of brotherly love" towards its Slavic, Orthodox Christian neighbour, a country which many Russians see as an extension of their own.
But with more fighting this week in central Kiev, officials in Moscow have abruptly changed the tone, making clear Yanukovich's earlier assurances that he was in control of events were ringing hollow.
The language used by U.S. and Russian officials has become sharper in the past 24 hours, highlighting the increasingly fraught geopolitical battle that is under way between East and West which is reminiscent of the Cold war.
Russian state television showed a constant loop of pictures of protesters throwing petrol bombs and wielding metal piping and wooden sticks at riot police while Russian commentators lamented the state of the Ukrainian capital.
Putin, who has said little in public about at least four meetings he has had with Yanukovich over the past six months, appears to have given the green light to his long-time political ally, Medvedev, to speak out more firmly on Ukraine as well as his foreign minister, Sergei Lavrov.
"We will try to fulfil all our promises that we made ... at the same time for this to happen it is necessary for our partners themselves to be in good shape and for the authorities in Ukraine to be legitimate and effective," Medvedev said.
"We adhere to all agreements but at the same time we (believe) that the authorities must focus on protecting the people and the law enforcement structures that are defending the interests of the state ... only in this case is it possible to develop full economic cooperation," he told Rossiya 24 television.