UPDATED: Ukraine hints at concessions to Russia as Scholz heads to region

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MOSCOW/KYIV, Feb 14 (Reuters) – Ukraine’s ambassador to Britain on Monday backtracked on remarks suggesting that Kyiv would reconsider its attempt to join NATO as Russia masses a huge force within striking distance of its neighbour, but said other concessions could be on offer.

The Kremlin said that if Ukraine renounced its aspiration to join the U.S.-European military alliance, that would significantly help address Russia’s concerns, and that President Vladimir Putin would meet his foreign and defence ministers on Monday.

A day after Washington said Russia could now invade Ukraine at any time on a surprise pretext, the Group of Seven large Western economies (G7) warned Russia of “massive” economic consequences if it did so, and promised Ukraine swift support.

German Chancellor Olaf Scholz flew to Kyiv for talks, to be followed on Tuesday by a meeting with Putin in Moscow, but a German official said Berlin did not expect concrete results.

A senior Russian military officer was quoted by the news agency Interfax as saying Russia was ready to open fire on foreign vessels that entered its waters illegally, though such a decision would have to be approved at the “highest level”.

Moscow denies planning to invade Ukraine and has accused the West of hysteria, but has made clear that it sees Kyiv’s quest for closer ties with the West, notably over NATO, as a threat.

Ukrainian Ambassador Vadym Prystaiko was initially quoted by the BBC as saying Ukraine might be “flexible” over this aim, “especially being threatened like that, blackmailed by that.”

Later, he said he had been misunderstood on NATO – although Ukraine was prepared to make other concessions.

‘READY FOR CONCESSIONS’

“We are not a member of NATO right now and to avoid war we are ready for many concessions and that is what we are doing in conversations with the Russians,” Prystaiko told the BBC.

“It has nothing to do with NATO, which (membership application) is enshrined in the constitution.”

The G7 finance ministers said that military aggression by Russia against Ukraine would trigger “economic and financial sanctions which will have massive and immediate consequences on the Russian economy”.

Oil prices climbed to fresh seven-year highs amid concerns that sanctions would disrupt exports from Russia, a major oil producer, in an already tight market.

Russia’s stock index slumped to its lowest level in almost three weeks, and the tension reverberated around major European markets, whose indices fell by between 1.6% and 3%.

The dollar hit a two-week high as investors sought a safe haven. Russian and Ukrainian bond pieces fell sharply.

Sanctions could rebound on Western powers, which rely heavily on Russia for energy supplies, notably gas, as well as other raw materials.

European banks in particular fear that Russia could be excluded from the SWIFT global payment system, which would prevent the repayment of Russian debts.

U.S. aircraft maker Boeing Co buys much of its titanium for airframes from Russia’s VSMPO-AVISMA – but said it was confident that other suppliers would enable it to work through any supply chain disruption.

Scholz may receive a cool reception in Kyiv, which has long resented the German-Russian Nord Stream 2 project – a pipeline that will allow Russia to circumvent Ukraine for its gas exports to Germany – and has bristled at Germany’s refusal to join other NATO partners in selling it weapons.

‘ANY DAY NOW’

The Kremlin said it expected Putin’s talks with Scholz on Tuesday to address Ukraine, security guarantees for Russia, and Nord Stream 2, which is awaiting European Union approval.

U.S. President Joe Biden’s National Security Adviser Jake Sullivan said on Sunday that an invasion could begin “any day now”, but U.S. officials said they could not confirm reports that U.S. intelligence indicated it would start on Wednesday.

Sullivan said the United States would also “defend every inch of NATO territory … and Russia, we think, fully understands that message”. Biden told Putin in a phone call on Saturday that any attack would harm and isolate Moscow.

The Kremlin said Putin told Biden that Washington had failed to take Russia’s main concerns into account, and that it had received no substantial answer on key elements of its security demands.

Washington regards many of the proposals as non-starters but has pushed the Kremlin to discuss them jointly with Washington and its European allies.

Washington and some European nations have been scaling back or evacuating embassy staff and urging citizens to leave Ukraine. Dutch airline KLM has suspended flights to Ukraine.

Ukraine on Sunday invoked a treaty to demand talks with Russia and members of the Organisation for Security and Cooperation in Europe OSCE within 48 hours to discuss Russia’s military build-up.

(Reporting by Reuters bureaux worldwide; Writing by Kevin Liffey; Editing by Andrew Cawthorne)

Photo – German Chancellor Olaf Scholz. EPA-EFE/CHRISTOPHE GATEAU / POOL

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