SIMFEROPOL, Ukraine/KIEV Ukraine's protest leaders named the ministers they want to form a new government following the overthrow of President Viktor Yanukovich, as an angry Russia put 150,000 troops on high alert in a show of strength.
President Vladimir Putin's order on Wednesday for soldiers to be ready for war games near Ukraine was the Kremlin's boldest gesture yet after days of sabre rattling since its ally Yanukovich was ousted at the weekend.
Moscow denied that the previously unannounced drill in its western military district was linked to events in its neighbour but it came amid a series of increasingly strident statements about the fate of Russian citizens and interests.
U.S. Secretary of State John Kerry warned Moscow that "any kind of military intervention that would violate the sovereign territorial integrity of Ukraine would be a huge - a grave mistake".
With the political turmoil hammering Ukraine's economy, the central bank said it would no longer intervene to shield the hryvnia currency, which tumbled 4 percent on Wednesday and is now down a fifth since January 1. Wednesday's abrupt abandonment of Ukraine's currency peg sent ripples to Russia where the rouble fell to five-year lows and bank shares fell.
In Kiev, leaders of the popular protests that toppled Yanukovich on Wednesday named former economy minister Arseny Yatseniuk as their choice to head a new interim government.
In a display of people power, the so-called 'Euromaidan' council made its announcement of Yatseniuk, and candidates for other key ministries, after its members addressed crowds on Independence Square, cradle of the insurgency.
Oleksander Turchinov, now acting president, said the new government would have to take unpopular decisions to head off default and guarantee a normal life for Ukraine's people.
The Euromaidan council's proposals must be approved by parliament, which meets on Thursday in an atmosphere heavy with memories of recent bloodshed, whose hundred or so victims are taking on the status of martyrs.
Yanukovich fled Kiev on Friday night after days of violence in which scores of his countrymen were killed. the government says it believes he is hiding in Crimea. It wants him tried at the International Criminal Court in the Hague.
The council named career diplomat Andriy Deshchytsya as foreign minister. Oleksander Shlapak, a former economy minister and former deputy head of the central bank, was named as finance minister.
"This is a government which is doomed to be able to work only for 3-4 months ... because they will have to take unpopular decisions," Turchinov said.
If the new ministers are approved, that would pave the way for talks with the International Monetary Fund to stave off financial meltdown now that Russia is expected to cut off a $15 billion (8 billion pounds) lifeline it offered Yanukovich when he turned his back on ties with the EU in November.
Kerry held out the possibility of providing $1 billion in U.S. loan guarantees for Ukraine, as well as U.S. budget support. He said Europe was also considering putting up roughly $1.5 billion in assistance for Ukraine.
Senior EU officials discussed a possible aid package for Ukraine and said officials would travel there alongside experts from the IMF to assess Kiev's financial needs.
In Crimea, thousands of ethnic Russians, who form the majority in the region, demonstrated for independence. They scuffled with rival demonstrators supporting the new Kiev authorities. Crimea is home to part of Russia's Black Sea Fleet, which Moscow said it was taking steps to secure.
Demonstrators poured into the regional capital Simferopol, where the provincial parliament was debating the crisis.
Pro-Russian crowds, some cossacks in silk and lambswool hats, shouted "Crimea is Russian!".
Rival demonstrators backing the new authorities - mainly ethnic Tatars repressed under Soviet rule - rallied under a pale blue flag, shouting "Ukraine! Ukraine!"
Russia has repeatedly expressed concern for the safety of Russian citizens in Ukraine, using language similar to statements that preceded its invasion of Georgia in 2008.
"In accordance with an order from the president of the Russian Federation, forces of the Western Military District were put on alert at 1400 (1000 GMT) today," Interfax news agency quoted Russian Defence Minister Sergei Shoigu as saying.
Shoigu also said Russia was also "carefully watching what is happening in Crimea" and taking "measures to guarantee the safety of facilities, infrastructure and arsenals of the Black Sea Fleet," in remarks reported by state news agency RIA.
Since Yanukovich's downfall, all eyes have been on Putin, who ordered the invasion of neighbouring Georgia in 2008 to protect two self-declared independent regions with many ethnic Russians and others holding Russian passports, and then recognised the regions as independent states.
Any military action in Ukraine, a country of 46 million people that has close ties with European powers and the United States, would be far more serious.
Despite the alarm raised by the sabre-rattling, many analysts expect Putin will pull back before taking armed action.
The war games were probably for show, said Moscow-based military analyst Alexander Golts: "Any rational analysis says that Russia would get nothing out of military intervention - it would become an international outcast."
(Additional reporting by Gabriela Baczynska in Donetsk, Steve Gutterman and Ian Bateson in Moscow, Adrian Croft in Brussels and Arshad Mohammed in Washington, Justyna Pawlak in Brussels; Writing by Peter Graff; Editing by Giles Elgood)
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