The Kremlin on Monday said there were no concrete plans for a summit over Ukraine between Russian President Vladimir Putin and his US counterpart Joe Biden, after the French president said the two leaders had agreed on a meeting in principle.
A summit might offer a path out of Europe's biggest military crisis in decades, and European financial markets edged higher on the glimmer of hope for a diplomatic solution. But by 1200 GMT they were in the red, and Russian stocks had plunged 7-8 per cent.
Both Washington and Moscow played down hopes of a breakthrough, and satellite imagery appeared to show Russian deployments closer to Ukraine's border than before.
Western countries accuse Russia of planning to invade a neighbour that it had controlled for centuries until the Soviet Union collapsed in 1991. Moscow denies planning any attack but has demanded sweeping security guarantees, including a promise that Ukraine will never join NATO.
Nerves frayed further when Moscow's close ally Belarus announced on Sunday that Russia would extend military exercises there.
Russia has tens of thousands of soldiers in Belarus - part of what Washington says is a force now numbering 169,000-190,000 troops in the region, including pro-Russian rebels in eastern Ukraine.
After talks in Brussels with NATO Secretary-General Jens Stoltenberg, British foreign minister Liz Truss said Western countries were preparing for a "worst-case scenario". The airlines Lufthansa, KLM and Air France all cancelled flights to Kyiv.
But the European Union rebuffed a call from Kyiv to impose some sanctions now to try to avert war before it started.
SUMMIT OR SANCTIONS?
Kremlin spokesperson Dmitry Peskov said a call or meeting between Putin and Biden could be set up at any time, but there were no concrete plans yet for a summit. Tensions were growing, he said, but a foreign ministers' meeting was possible this week.
Macron's office and the White House said the substance of the plan would be worked out by US Secretary of State Antony Blinken and Russian Foreign Minister Sergei Lavrov during a meeting planned for Thursday.
An adviser to French President Emmanuel Macron told Reuters that Macron had put the summit proposal to Putin at Biden's request.
"We're slowly changing the course of things," said the adviser, who declined to be named.
The White House said Biden had accepted the meeting "in principle" but only "if an invasion hasn't happened".
"We are always ready for diplomacy," White House Press Secretary Jen Psaki said. "We are also ready to impose swift and severe consequences, should Russia instead choose war."
Ukraine said it must be included in any decisions aimed at resolving the crisis, and that it had seen warnings online that hackers were preparing to launch cyberattacks on government agencies, banks and the military.
"No one can resolve our issue without us," top security official Oleksiy Danilov told a briefing.
Western countries say the sanctions they are preparing would hit Russian companies and individuals. People familiar with the matter said they could include barring US financial institutions from processing transactions for Russian banks.
However, EU foreign policy chief Josep Borrell and some of the assembled national foreign ministers made clear the bloc would not act yet. Borrell said he would convene an extraordinary meeting to agree sanctions only "when the moment comes".
FIGHTING IN THE EAST
The crisis has raised worries about the stability of energy supplies to Europe. Germany, which relies on Russia for around half of its natural gas, said its supply was currently "secured". Chancellor Olaf Scholz, who visited Putin in Moscow last week, was due to speak with him again on Monday, a government spokesperson said.
Putin has long chafed at the ascendancy of pro-Western politicians promising to advance democracy and fight corruption in Ukraine. When mass protests in favour of integration with the West forced a pro-Russian president to flee Kyiv in 2014, Russia responded by seizing Crimea from Ukraine, and supported rebels who took control of parts of the east adjoining Russia.
US-based satellite imagery company Maxar on Sunday reported new deployments of Russian units in forests, farms and industrial areas as little as 15 km (9 miles) from the Ukrainian border. Read full story
Sporadic shelling across the line dividing government forces from the pro-Russian insurgents has intensified since Thursday, with both sides trading blame.
The separatists have been bussing out civilians, accusing Kyiv of planning an attack. Ukraine and the West view the rebels as Russian proxies, escalating to provide Moscow with a justification to invade.
Russia's FSB intelligence service said a shell fired from Ukrainian territory had hit a Russian border guard post in the city of Rostov, but that no one had been hurt.
The rebels said two civilians were killed in shelling by Ukrainian government forces, Russia's RIA news agency said. Russian media reported 61,000 evacuees from east Ukraine had crossed into Russia.
Kyiv denies firing on civilians or across the border. Washington says accusations that Kyiv would intentionally escalate the conflict are absurd at a time when Russia has massed troops on the border.
