By Olesya Astakhova and Andrew Osborn

BELBEK AIR BASE, Crimea/MOSCOW (Reuters) - Vladimir Putin flew into annexed Crimea on Friday a day after staging war games there, and said he hoped Ukraine would see "common sense" when it came to resolving a diplomatic crisis over the peninsula.

Two years after Russian troops seized the peninsula, it is again the focus of international tension, after the Russian president accused Kiev last week of sending saboteurs who clashed with Russian troops.

Kiev, which has also fought a two year war against pro-Russian separatists in two eastern provinces, denies the border incident ever took place and calls it a fabrication that could be used as a pretext for a new Russian invasion.

The Russian leader has used threatening rhetoric, promising unspecified "counter-measures", and has built up troops ahead of a big military exercise next month.

He addressed the crisis again on Friday, opening a meeting of his Security Council at an air base near the naval port of Sevastopol on his first visit to Crimea since he made the initial accusations.

"It is clear that we have gathered for a well known reason after the infamous incident, after we thwarted attempts by groups of Ukrainian army saboteurs to break into (our) territory," he said.

"Judging by all accounts, our partners in Kiev have decided to escalate the situation. We are all familiar with this method of escalation. It goes back a long way and has sometimes been used successfully but not always.

"I hope that this won't be a final choice ... and that common sense will prevail," he added.

WAR GAMES

On Thursday, Russian naval and land forces practiced swiftly moving military hardware and troops to Crimea, already one of the world's most militarised areas, in a logistics exercise that foreshadows larger war games planned for next month.

Russia's Black Sea Fleet, around 2,500 troops and up to 350 armored vehicles were involved in the exercise, which unfolded as tensions have also flared in eastern Ukraine, where a truce that curbed fighting is looking increasingly shaky.

Ukrainian President Petro Poroshenko said on Thursday he did not rule out introducing martial law and a new wave of military mobilization if the east Ukraine conflict worsened.

Putin on Friday accused the Ukrainian government of trying to destabilize Crimea to distract attention from its failure to implement a peace deal covering the conflict in eastern Ukraine, a region known as the Donbass.

While fighting that killed thousands of people in the Donbass has ebbed since early 2015, pro-Russian separatists there regularly exchange fire with Ukrainian government forces, and both sides accuse each other of failing to implement terms of the truce, known as the Minsk peace process.

Although Kiev believes Putin is preparing for more fighting, some experts believe he is more interested in gaining diplomatic leverage, seeking to use the latest crisis to prod the West to press Ukraine into doing more to uphold the accords.

"Despite the strongly worded statements by Putin, and the continued Russian military build-up on Ukraine's borders, IHS Markit continues to hold the view that Russia is not preparing for an imminent overt invasion," said Alex Kokcharov, principal analyst at the London-based consultancy.

"By accusing Ukraine of terrorism and by building up military threats, Russia is attempting to weaken Western support for Kiev and to pressure both the West and Ukraine to agree to the Donbass settlement on Moscow's terms."

(Additional reporting by Katya Golubkova; Editing by Peter Graff)