With a display of fireworks in Moscow and Crimea, President Vladimir Putin has signed a law formalizing Russia's takeover of Crimea from Ukraine, despite fresh sanctions from the EU and the US. The European Union's latest measures target twelve people involved in Russia's annexation of the peninsula.
Earlier, Ukraine and the EU signed an accord forging closer political ties. Separately, the Organization for Security and Co-operation in Europe has agreed to send monitors to Ukraine, after Russia dropped objections.
The six-month mission will initially consist of 100 international civilian monitors, who will be employed in nine regions of Ukraine - including the south-eastern areas rocked by violence between pro-Ukraine and pro-Russian activists.
The observers will not go to Crimea but German Foreign Minister Frank-Walter Steinmeier said the decision was a step that helps to support our de-escalation efforts.
Western diplomats had blamed Russia for several failed attempt to agree such a mission to help defuse the tense situation. In Brussels, EU leaders also said they would step up efforts to reduce energy dependency on Russia.
The EU's new sanctions add to an existing list of 21 officials affected by travel bans and asset freezes. They include Deputy Prime Minister Dmitry Rogozin and two close aides of Vladimir Putin, Sergei Glazyev and Vladislav Surkov.
While the list targets several figures close to the Russian president, it does not hit his inner circle as hard as the sanctions announced by the US on Thursday.
Shares fell sharply in Moscow on Friday as investors assessed the impact of Western sanctions on Russia's economy. Two credit-rating agencies have now downgraded Russia's outlook from stable to negative. Visa and Mastercard have also stopped providing services to two Russian financial institutions, Bank Rossiya (hit by US sanctions) and SMP Bank.
The accord signed by the EU and Ukrainian Prime Minister Arseniy Yatsenyuk in Brussels on Friday contains the political part of the EU Association Agreement rejected in November by Viktor Yanukovych, who was then Ukraine's president.
That decision triggered violent protests, Mr Yanukovych's eventual overthrow and Russia's subsequent move into Crimea.
The United Nations Secretary General, Ban Ki-moon, visiting Kiev the day after meeting Mr Putin in Moscow, urged Ukraine and Russia to hold talks to prevent the crisis spreading. Ukraine's interim President Olexander Turchynov, after meeting Mr Ban, said Ukraine would never accept the seizure of its territory.
In a separate development on Friday, Ukrainian police detained the head of the Naftogaz state energy firm, Yevhen Bakulin. He is accused of embezzling 4bn dollars during Mr Yanukovych's time in power.
President Putin ordered fireworks displays for Moscow and Crimea on Friday night to celebrate the region becoming part of the Russian Federation.
Russia has put in place travel bans and asset freezes for nine prominent US officials and lawmakers in response to Thursday's announcement of sanctions targeting Mr Putin's allies by President Barack Obama.
Senator John McCain, one of those targeted, joked in a tweet that he would have to cancel his spring break in Siberia. Putin said Moscow would not retaliate for the latest EU sanctions - although the Russian foreign ministry said there would be a response.