* U.S. weighs $1 billion in loan guarantees for Ukraine
* U.S. budget support also possible for Ukraine, Kerry says
* 'This is not Rocky IV," Kerry tells reporters (Adds comment on IMF, background in paragraphs 9 and 12-14)
By Arshad Mohammed and Lesley Wroughton
WASHINGTON, Feb 26 (Reuters) - The United States warned Russia on Wednesday it would be a "grave mistake" to intervene militarily in Ukraine and said it was considering $1 billion in U.S. loan guarantees and additional funding to help Kiev.
U.S. Secretary of State John Kerry issued the warning after Russian President Vladimir Putin put 150,000 combat troops on high alert for war games near Ukraine, Moscow's boldest gesture since the ouster of ally Viktor Yanukovich as president in Kiev.
"For a country that has spoken out so frequently ... against foreign intervention in Libya, in Syria, and elsewhere, it would be important for them to heed those warnings as they think about options in the sovereign nation of Ukraine," Kerry told a small group of reporters at the U.S. State Department.
"I don't think there should be any doubt whatsoever that any kind of military intervention that would violate the sovereign territorial integrity of Ukraine would be a huge - a grave mistake," he added.
"If there were any kind of decision like that, I do not think that's a cheap decision. I think it's a very expensive decision."
Kerry said Washington was considering $1 billion in U.S. loan guarantees for Ukraine, as well as possible budget support for the former Soviet republic, but said no decisions had been made. He said Europe was also mulling roughly $1.5 billion in assistance to Ukraine.
"We are formulating initially a $1 billion loan guarantee with some other pieces, but we are also looking at the possibility of additional assistance," Kerry said. The Obama administration was discussing the matter internally, he said.
APPLAUSE NOT ENOUGH
"I don't think it's enough to be heralding the advent of democracy and applaud the courage and conviction of the people who brought about this transition and then just not do anything. I think that is unconscionable," he added.
State Department spokeswoman Jen Psaki later said the United States was prepared to take immediate steps to help Ukraine's economy after a new government was formed and in coordination with a lending program from the International Monetary Fund, the global financial institution.
Ukraine fell into political crisis last year when Yanukovich spurned a broad trade deal with the European Union and accepted a $15 billion Russian bailout that is now in question.
After weeks of popular protests and clashes between security forces and demonstrators, Yanukovich fled his Kiev office and Ukraine's parliament voted to remove him from power on Friday.
With Kiev desperate for cash as it charts a new future, U.S. officials have emphasized that any U.S. funding would complement an IMF program, which would offer oversight of economic reforms and ensure money is being spent properly.
IMF officials told Reuters this week that one option under review to help prop up Ukraine's ailing economy was a bailout that would include IMF money as well as bilateral loans and guarantees from the U.S. and other governments.
The United States is the IMF's largest and most influential member country. But as the IMF prepares to send a technical mission to Ukraine to assess the state of the economy, IMF insiders say it is important that the institution be seen as an independent broker in Ukraine.
ECHOES OF COLD WAR
U.S. officials from the White House on down said Russia must respect Ukraine's territorial integrity as Moscow put combat troops on high alert for war games near its Western neighbor.
Earlier this month, a Kremlin aide warned that Moscow could intervene and accused Washington of breaching their 1994 treaty under which Russia removed Soviet nuclear weapons from Ukraine.
It is unlikely the United States and its allies in NATO would risk an outright military confrontation with Russia but such Russian rhetoric, ringing with echoes of the Cold War, underlines the high stakes in Ukraine, whose 46 million people and sprawling territory are caught in a geopolitical tug-of-war.
Kerry said Russia should respect the Ukrainian people's desire for change and that they should not have to choose between relations with Europe and the United States on one hand and Russia on the other.
"This is not Rocky IV," he said in a reference to a 1985 film pitting U.S. boxer Rocky Balboa played by Sylvester Stallone against a Soviet portrayed by Dolph Lundgren.
"It is not a zero-sum game. We do not view it through the lens of East-West, Russia-U.S. or anything else," Kerry added. (Editing by David Storey, Stephen Powell and Mohammad Zargham)
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