* NATO at pains to avoid escalation in Ukraine crisis
* Russian-backed units move on towns in south, east Ukraine
* NATO determined to avoid military involvement
By Luke Baker
BRUSSELS, April 15 (Reuters) - From the moment Russia first moved on Ukraine and seized Crimea, NATO has not lost an opportunity to admonish Moscow for its actions, warning that peace in Europe is under threat and the sovereignty of a friend being violated.
Yet between NATO's tough rhetoric and its ability and willingness to act, there is now a substantial gap, one that Russia is exploiting.
The 28-country alliance - on paper the world's most powerful military organisation - has no intention of getting militarily involved in Ukraine. The risks of escalation with Russia are far too great, and neither President Barack Obama nor his European allies have any appetite for war.
Instead it is focused on monitoring what Moscow is up to from the air, strengthening the defences of NATO member states on the ground and staging training exercises to show the world it is not sitting idly by.
The problem is, that is doing nothing to stop Russia.
Not only has Moscow annexed Crimea, there are now pro-Moscow paramilitary units in towns and cities across southern and eastern Ukraine, with the very real threat that those regions could be prised away too.
Russia, which during the Cold War created the Warsaw Pact as a counterweight to NATO, seems almost determined to goad its one-time enemy in an attempt to expose its powerlessness, knowing its response will be mostly words, not action.
Washington and the European Union have moved against Russia with sanctions, putting restrictions on individuals and firms, but it has had little impact on Moscow's behaviour so far, despite the threat of harder-hitting measures.
Asked what it would take for NATO to get militarily involved, Secretary General Anders Fogh Rasmussen made it clear on Tuesday, and his comments will reassure military planners in Moscow if they did have any concerns about a showdown.
"We are not discussing military options," Rasmussen said as he arrived at a meeting of EU defence ministers to discuss the crisis in Ukraine.
"We do believe that the right way forward is to find a political and diplomatic solution. We are focused militarily on strengthening the defence of our allies, that's our core task."
THE BOSNIA TEMPLATE
After more than a decade of debilitating wars in Afghanistan and Iraq, the United States, the supreme decider within NATO, has no desire for another military confrontation, especially with Russia. The threat of two nuclear powers facing off is too distressing to contemplate.
But the danger with the crisis in Ukraine is the law of unintended consequences.
If Russia or its proxies were to misjudge the situation and overstep by destabilising Ukraine on its borders with Poland, Hungary, Romania or Slovakia - all EU and NATO member states - events could easily spiral out of hand.
The same situation pertains to Estonia, Latvia and Lithuania, the only NATO and EU states that were once part of the Soviet Union itself, and which increasingly feel threatened by Moscow.
Under Article 5 of NATO's treaty, an attack on one member state is deemed an attack on all.
Alliance officials say their mandate limits NATO's reach - it cannot act in Ukraine because Ukraine is not in NATO. Nevertheless, the mandate has proven flexible in the past when Washington and its allies had the political will to act: NATO's three wars of the past generation, in Afghanistan, Kosovo and Bosnia, were all fought outside the territory of its members.
But even if NATO is not prepared to fight for Ukraine, the mutual protection pact means that it could be drawn into a conflict, if a NATO member that borders Ukraine or Russia were to be attacked or threatened.
While such a scenario appears unlikely, the annexation of Crimea seemed almost equally so three months ago.
What is more, Russia has doubled its military spending since 2004 while most NATO member states have sharply curtailed theirs as a result of the economic crisis.
NATO's superpower Washington still spends around eight times as much on weapons as Moscow, but many of its European allies would struggle to field a force that would frighten Russia.
Given the desire to avoid confrontation, NATO will do everything it can to stick to verbal pressure to contain Russia. Yet that runs the risk of convincing Moscow that NATO is ultimately toothless, a relic of an earlier era.
That in turn could lead to another dangerous scenario. If Russia or its proxies go too far and Ukraine's army retaliates, a full-on military conflict could erupt in Ukraine, a country of 45 million people as large as France.
At that point, given the threat to Europe's security and the grave risk to so many lives, the EU and NATO may decide there is an overriding humanitarian obligation to intervene, even if military involvement is the last thing they want.
That would in many ways mirror NATO involvement in Bosnia in the early 1990s, which began with monitoring in coordination with the United Nations and steadily grew into combat air operations and the deployment of 60,000 soldiers.
Russia may be counting on NATO to keep clear. But if history is any guide, a steady escalation in Ukraine runs the risk of sparking events that the West, and by extension NATO, could find it cannot ignore, despite its best intentions. (Additional reporting by Adrian Croft; Writing by Luke Baker; Editing by Peter Graff)