* Russian forces storm Ukrainian naval HQ in Sevastopol
* No shots fired in tense operation
* Russia says OSCE has exhausted military inspections
* Moscow says will retaliate for Western sanctions
SEVASTOPOL/MOSCOW, March 19 (Reuters) - Russian troops backed by unarmed volunteers stormed Ukraine's naval headquarters in the Crimean port of Sevastopol on Wednesday and raised the Russian flag, as Moscow tightened its control of the Black Sea peninsula.
The dramatic seizure came as Russia and the West dug in for a long confrontation over Moscow's annexation of Crimea, with the United States and Europe groping for ways to increase pressure on a defiant Russian President Vladimir Putin.
Russian lawmakers raced to ratify a treaty making the Ukrainian region part of Russia by the end of the week, despite threats of further sanctions from Washington and Brussels.
The Russian military moved swiftly to neutralise any threat of armed resistance in Crimea.
"This morning they stormed the compound. They cut the gates open, but I heard no shooting," said Oleksander Balanyuk, a captain in the navy, walking out of the compound in his uniform and carrying his belongings.
"This thing should have been solved politically. Now all I can do is stand here at the gate. There is nothing else I can do," he told Reuters, appearing ashamed and downcast.
Ukrainian military spokesman Vladislav Seleznyov said the commander of the Ukrainian navy, Admiral Serhiy Haiduk, was driven away by what appeared to be Russian special forces.
Russia sent thousands of soldiers to Crimea in the buildup to a weekend referendum in which the Russian-majority region voted overwhelmingly to leave Ukraine and join Moscow, reflecting national loyalties and hopes of higher wages.
But there is unease among pro-Ukrainian Crimeans who have complained about the heavy armed presence across the region.
"I was born here, my family is here, I have a job here and I am not going anywhere unless there is an all-out military conflict," said Viktor, a 23-year-old salesman. "It is my home but things will not be the same any more."
A few hundred metres away, the local authorities attached new, Russian letters spelling "State Council of the Crimean Republic" on the building of the local assembly.
Putin said his move to annex Crimea was justified by "fascists" in Kiev who overthrew pro-Moscow president Viktor Yanukovich after deadly street protests last month.
Ukraine and Western governments have dismissed the referendum as a sham, and say there is no justification for Putin's actions.
Yanukovich enraged many Ukrainians by turning his back on closer ties with Europe to sign agreements on economic integration with former Soviet overlord Russia.
GERMANY MAKES MOVE
Germany's cabinet approved EU plans for closer political cooperation with Ukraine, a government source said, clearing the way for Chancellor Angela Merkel to sign part of a so-called association agreement at an EU summit later this week.
The 28-member bloc is expected to sign a more far-reaching trade accord with Ukraine later.
But maintaining aggressive rhetoric reminiscent of the Cold War, Russia accused Western states of violating a pledge to respect Ukraine's sovereignty and political independence under a 1994 security assurance agreement, saying they had "indulged a coup d'etat" that ousted Yanukovich.
Moscow, which has said it will retaliate for so far largely symbolic Western sanctions targeting Russian officials, announced on Wednesday it was closing its military facilities to a European security watchdog for the rest of the year.
The Russian Defence Ministry was quoted as saying the signatories of a 2011 Organisation for Security and Cooperation in Europe agreement had exhausted their quotas to inspect Russian military facilities and a planned inspection in the coming days would be the last.
U.S. Vice President Joe Biden was in Lithuania to round off a lightning visit intended to reassure Baltic and east European NATO allies that Washington will stand by them after Moscow's action in the neighbouring former Soviet republic.
In Warsaw on Tuesday, Biden said the United States may run more ground and naval military exercises to help Baltic states near Russia beef up their capacity after what he called Putin's "land grab" in Ukraine.
Washington and Brussels said further sanctions would follow the visa bans and asset freezes imposed so far on a handful of Russian and Crimean officials, drawing derision from Moscow.
On a visit to Japan, which has joined the Western chorus of condemnation of Moscow's action, close Putin ally Igor Sechin, CEO of Russian oil major Rosneft, said expanding sanctions would only aggravate the crisis.
European Union leaders will consider widening the number of people targeted by personal sanctions when they hold a regular summit in Thursday and Friday, diplomats said, as well as signing the political part of an association agreement with Ukraine's interim government.
EU officials say they have identified more than 100 potential targets. Some media reports say Sechin and the head of Russian gas monopoly Gazprom are on the wider list.
But some EU officials are wary of moving too fast towards much tougher sanctions, both due to the risk of self-inflicted injury to Europe's convalescent economy and out of concern not to exhaust the West's toolbox of non-military measures.
France has said it is considering suspending a contract to supply two helicopter carriers to the Russian military, the first of which is due to be delivered later this year. French officials say they expect EU partner Britain, in return, to close its gates and bank vaults to oligarchs close to Putin.
In a rousing patriotic speech to Russian lawmakers denouncing what he called the West's hypocrisy and double standards, Putin said on Tuesday that Crimea was historically Russian and was returning home.
After signing a treaty to make the Ukrainian region part of the Russian Federation, he told a flag-waving rally in Red Square beneath the Kremlin walls, near where Soviet politburo leaders once took the salute at May Day parades, that Crimea has returned to "home port".
(Additional reporting by Mike Collett-White and Gabriela Baczynska in Simferopol and Elizabeth Piper and Steve Gutterman in Moscow; Writing by Mike Collett-White and Paul Taylor)