* U.S. on campaign to reassure allies over Ukraine crisis
* Russia says Ukraine vote could deepen divisions (Adds meeting with PM Ponta, Biden quotes, detail, background)
By Luiza Ilie
BUCHAREST, May 21 (Reuters) - U.S. Vice President Joe Biden warned Russia on Wednesday that undermining a May 25 presidential election in Ukraine would bring greater costs for Russia - already subject to Western sanctions since its annexation of Crimea.
Biden arrived in Bucharest on Tuesday as part of a U.S. campaign to reassure east European allies, including ex-communist Romania which joined NATO a decade ago, of America's backing in the West's confrontation with Russia over Ukraine.
"(We) have agreed that if Russia undermines these elections on Sunday we must remain resolute in imposing greater costs on Russia and we must be equally resolute to invest in the NATO alliance," he told reporters after meeting Romanian President Traian Basescu.
Kiev's interim authorities hope Sunday's vote will help restore calm after five months of upheaval that has included violent street protests, the Crimea annexation and pro-Russian separatist rebellions in the east of the former Soviet republic.
Putin said earlier the election could be "a step in the right direction" but aides have signaled Moscow may not recognize the outcome, especially if Kiev continues to use its armed forces against separatists in the east.
A senior Russian official said on Tuesday the vote would deepen divisions in Ukraine if there is no end to hostilities and a "road map" to end the crisis is not implemented.
Western observers say the election can bring stability and Germany's foreign minister Frank-Walter Steinmeier has said the days left must be used to ensure polling stations can open and people can vote free from intimidation.
Biden echoed this stance. "All countries should use their influence to promote a stable and positive environment so that Ukrainian citizens can cast their vote freely," he said.
The development of a secure, diverse and interconnected energy market would be the next step of European integration, Biden said after meeting Romanian Prime Minister Victor Ponta. EU states are seeking to cut their dependence on Russian gas.
"We commend the Ukrainian government for the steps they have taken to engage Ukrainians from all parts of their country, including the East and South on the issues of constitutional reform," Biden said.
Russia's state-run news agency RIA, citing the defense ministry, said on Wednesday that Russian troops that took part in military exercises in three provinces bordering Ukraine have packed up and are preparing to return to their permanent bases.
But NATO and the United States said they saw no signs of a withdrawal.
Biden said an U.S. anti-missile shield at Romania's Deveselu site was on track to become operational in 2015 and praised Bucharest's plans to increase defense budget to 2 percent of GDP in the next years from about 1.5 percent.
The United States have said that the missile interceptors could be launched from the site in Romania to defend NATO in the case of a missile attack from the Middle East. (Writing by Radu Marinas; Editing by Mark Heinrich)