Ukraine should demilitarize for normalization with Russia, President Vladimir Putin said in a statement late Tuesday.

Putin also demanded that Ukraine should recognize Crimea and Sevastopol as Russian territory, renounce plans to join NATO and negotiate the situation in Donbass.

On Monday, Putin ordered a "peacekeeping operation" in Ukraine's Luhansk and Donetsk regions after recognizing the separatist regions' independence, paving the way to provide them more military support – a direct challenge to the West that will fuel fears that Russia could imminently invade Ukraine.

The carefully staged move announced in the Kremlin could lead to new sanctions on Russia and flies in the face of European efforts for a diplomatic solution to the escalating crisis, which has brought East-West relations to a new low and jeopardized trade. Britain’s prime minister called it a "breach of international law."

It came amid a spike in skirmishes in the eastern regions that Western powers believe Russia could use as a pretext for an attack on the western-looking democracy that has defied Moscow’s attempts to pull it back into its orbit.

Putin justified his decision in a far-reaching, pre-recorded speech blaming NATO for the current crisis and calling the United States-led alliance an existential threat to Russia. Sweeping through more than a century of history, he painted today’s Ukraine as a modern construct that is inextricably linked to Russia. He charged that Ukraine had inherited Russia’s historic lands and after the Soviet collapse was used by the West to contain Russia.