* Putin presses on with moves to annex Crimea
* Signs order to approve draft treaty
* U.S., EU sanction small group of Russians and Ukrainians
* Ukraine PM offers Russia reassurance on NATO, militias
* Putin to address special session of parliament
By Vladimir Soldatkin and Steve Gutterman
MOSCOW, March 18 (Reuters) - Russian President Vladimir Putin, defying Ukrainian protests and Western sanctions, told parliament on Tuesday that Russia will move forward with procedures to annex Ukraine's Crimean region.
Putin signed an order "to approve the draft treaty between the Russian Federation and the Republic of Crimea on adopting the Republic of Crimea into the Russian Federation". The order indicated the president would sign the treaty with Crimea's Russian-installed leader, who is in Moscow to request incorporation into Russia, but it gave no date.
The move followed a disputed referendum in Crimea on Sunday, staged under Russian military occupation, in which a Soviet-style 97 percent of voters were declared to have voted to return to Russian rule, after 60 years as part of Ukraine.
By pressing ahead with steps to dismember Ukraine against its will, Putin raised the stakes in the most serious East-West crisis since the end of the Cold War.
But Ukraine's interim prime minister, Arseniy Yatseniuk, sought to reassure Moscow on two key areas of concern, saying in a televised address delivered in Russian that Kiev was not seeking to join NATO, the U.S.-led military alliance, and would act to disarm Ukrainian nationalist militias.
On Monday, the United States and the European Union imposed personal sanctions on a handful of officials from Russia and Ukraine accused of involvement in Moscow's military seizure of the Black Sea peninsula, most of whose 2 million residents are ethnic Russians.
Russian politicians dismissed the sanctions as insignificant and a badge of honour. The State Duma, or lower house, adopted a statement urging Washington and Brussels to extend the visa ban and asset freeze to all its members.
Leonid Slutsky, one of the lawmakers on the sanctions list, hailed Crimea's decision as historic. "Today we see justice and truth reborn," he said.
Japan joined the mild Western sanctions on Tuesday, announcing the suspension of talks with Russia on investment promotion and visa liberalisation.
Putin was to address a special joint session of the Russian parliament on the Crimea issue on Tuesday.
Russian forces took control of Crimea in late February following the toppling of Ukrainian president Viktor Yanukovich after deadly clashes between riot police and protesters trying to overturn his decision to spurn a trade and cooperation deal with the EU and seek closer ties with Russia.
Despite strongly worded condemnations of the Crimean referendum, Western nations were cautious in their first practical steps against Moscow, seeking to leave the door open for a diplomatic solution.
Russian stocks and the rouble rallied strongly on Monday as investors noted the initial sanctions did not target businesses or executives. But shares gave up early gains on Tuesday and the rouble fell 0.6 percent against the dollar and the euro.
In a sign of the negative impact of the crisis on the investment climate, Russia's state property agency said it may postpone major privatisation deals until the second half of the year.
U.S. President Barack Obama imposed sanctions on 11 Russians and Ukrainians blamed for the military seizure of Crimea, including Yanukovich, and Vladislav Surkov and Sergei Glazyev, two aides to Putin.
Putin himself, suspected in the West of trying to resurrect as much as possible of the former Soviet Union under Russian leadership, was not on the blacklist.
Amid fears that Russia might move into eastern Ukraine, Obama warned that "further provocations" would only increase Russia's isolation and exact a greater toll on its economy.
A senior U.S. official said Obama's order cleared the way to sanction people associated with the arms industry and to target "the personal wealth of cronies" of the Russian leadership.
EU foreign ministers agreed to subject 21 Russian and Ukrainian officials to visa restrictions and asset freezes.
There were only three names in common on the U.S. and European lists - Crimean Prime Minister Sergei Aksyonov, Crimean parliament Speaker Vladimir Konstantinov and Slutsky, chairman of the Duma's committee on the Russian-led Commonwealth of Independent States, or CIS, grouping former Soviet republics.
The U.S. list targeted higher-profile Russian officials close to Putin while the EU went for mid-ranking officials and military commanders more directly involved on the ground.
Washington and Brussels said more measures could follow in the coming days if Russia formally annexes Crimea.
The EU also said its leaders would sign the political part of an association agreement with Ukraine on Friday, in a gesture of support for the fragile coalition brought to power by last month's uprising. The accord does not include any commitment to eventual EU membership, on which the bloc's members are divided.
Highlighting rifts in the EU, member state Austria offered on Tuesday to mediate between Moscow and the West. Chancellor Werner Faymann said Vienna's military neutrality made it an "honest broker", while Foreign Minister Sebastian Kurz said he felt understanding for both sides in the conflict.
Putin has declared that Russia has the right to defend, by military force if necessary, Russian citizens and Russian speakers living in former Soviet republics, raising concerns that Moscow may intervene elsewhere.
Putin has repeatedly accused the new leadership in Kiev of failing to protect Russian-speakers from violent Ukrainian nationalists. Ukraine's government has accused Moscow of staging provocations in Russian-speaking regions of eastern Ukraine to justify military intervention.
In a symbolic gesture, Askyonov announced on Twitter that Crimea would switch to Moscow time from March 30, putting it two hours ahead of the rest of Ukraine.
In the Crimean capital Simferopol, the local government and businesses set about preparing for the switch to Russian rule.
Members of volunteer security groups, who had helped local police and Russian forces keep order in the referendum run-up, handed in their red armbands on the central Lenin Square, where a statue of the founder of the Soviet Union still stands.
Banks scrambled to introduce the rouble as an official currency alongside the Ukrainian hryvnia, although the switch could take place at the end of the month after March pensions and salaries are cleared, banking sources said.
Members of the pan-European Organisation for Security and Cooperation in Europe were meeting again in Vienna to discuss the prospects for sending a monitoring mission to Ukraine.
An OSCE spokeswoman tweeted that there was no consensus yet, and all 57 members would have to agree on a detailed mandate. Diplomats said Russia had been blocking this. One said Moscow wanted any reference to the sovereignty and territorial integrity of Ukraine removed from the text.
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