By Steve Holland and Roberta Rampton
WASHINGTON, March 12 (Reuters) - President Barack Obama warned Russia on Wednesday the West would be forced to apply a cost to Moscow if it fails to change course in its dispute with Ukraine, in a high-profile show of support for Ukraine's embattled prime minister.
Obama held face-to-face talks with new Ukrainian Prime Minister Arseny Yatseniuk in the Oval Office in a search for diplomatic leverage that will force Russian President Vladimir Putin to loosen his military grip on Ukraine's southern Crimea region.
Speaking to reporters, Obama renewed his pledge to punish Russia with sanctions if Putin does not back down and ridiculed hastily arranged plans by Crimea's pro-Russian parliament to hold a referendum on Sunday on whether the region should be annexed by Russia.
"The issue now is whether Russia is able to militarily dominate a region of somebody else's country, engineer a slapdash referendum and ignore not only the Ukrainian constitution but a Ukrainian government that includes parties that are historically in opposition with each other," Obama said.
He said the normal democratic process in Ukraine could give Russia a greater voice in Ukraine over time.
"There is a constitutional process in place and a set of elections that they can move forward on that in fact could lead to different arrangements over time with the Crimean region. But that is not something that can be done with the barrel of a gun pointed at you," Obama said.
Yatseniuk said his government was eager and willing to have talks with Russia about Ukraine, but made clear that Ukraine "is and will be a part of the Western world."
"We fight for our freedom, we fight for our independence, we fight for our sovereignty, and we will never surrender," he said.
"Mr. Putin - tear down this wall - the wall of more intimidation and military aggression," Yatseniuk said to reporters as he left the White House, referring to then- President Ronald Reagan's challenge to the Soviet Union in a 1987 speech at the Berlin Wall.
Obama has signed an executive order that permits the United States to impose visa bans and freeze any assets in the United States held by Russians or Ukrainians who provoked the crisis after pro-Moscow President Viktor Yanukovich was ousted.
"We will continue to say to the Russian government that if it continues on the path that it is on, then not only us but the international community, the European Union and others will be forced to apply a cost to Russia's violation of international law and its encroachments on Ukraine," Obama said.
With Secretary of State John Kerry set to meet his Russian counterpart in London on Friday, Obama said there was still time to work out a resolution that respects Russia's interest in Ukraine.
"My hope is that as a consequence of diplomatic efforts over the next several days, that there will be a rethinking of the process that has been forward," he said.
(Reporting by Steve Holland and Roberta Rampton; Editing by Sandra Maler and Peter Cooney)