KYIV (REUTERS) - President Vladimir Putin claimed victory in the biggest battle of the Ukraine war on Thursday (April 21), declaring the port of Mariupol "liberated" after nearly two months of siege, despite hundreds of defenders still holding out inside a giant steel works plant.

In a televised meeting with his defence minister inside the Kremlin, Putin said there was no need for a final confrontation with the last defenders who were boxed in.

“I consider the proposed storming of the industrial zone unnecessary,” he told his Defence Minister Sergei Shoigu in a televised meeting at the Kremlin. “I order you to cancel it.”

“There’s no need to climb into these catacombs and crawl underground through these industrial facilities,” he said. “Block off this industrial area so that not even a fly can get through.”

Mr Shoigu estimated 2,000 Ukrainian fighters remained inside the plant. Mr Putin called on them to surrender, saying Russia would treat them with respect.  

Asked to comment on Russia’s decision to blockade the steel works rather than storm it, Ukraine’s defence ministry spokeswoman said the move testified to Putin’s “schizophrenic tendencies” and gave no further response.

Putin’s declaration of victory lets him claim his first big prize since his forces were driven out of northern Ukraine last month after failing to capture the capital, Kyiv.

Overnight, Mikhailo Podolyak, Ukraine’s chief negotiator, proposed that talks be held inside Mariupol itself on the fate of its last defenders.  

“Without any conditions. We’re ready to hold a ‘special round of negotiations’ right in Mariupol,” he tweeted late on Wednesday. “One on one. Two on two. To save our guys, Azov (battalion), military, civilians, children, the living & the wounded. Everyone. Because they are ours. Because they are in my heart. Forever.”

But Russia now says that, apart from the huge steel plant, the city is effectively under its control.

Russian forces had ealier said they will seize the Mariupol steel plant that is the last main stronghold of resistance in the besieged city on Thursday after Ukraine proposed talks on evacuating troops and civilians there.

Mariupol would be the biggest city to be seized by Russia since invading Ukraine eight weeks ago in an attack that has taken longer than some military analysts expected, seen over five million people flee abroad and turned towns and cities to rubble.

Journalists who reached it during the siege found streets littered with corpses, nearly all buildings destroyed, and residents huddled freezing in cellars, venturing out to cook scraps on makeshift stoves or to bury bodies in gardens.

Two incidents in particular became symbolic of what Kyiv and the West call Russian war crimes – the bombing of a maternity hospital and, a week later, of a theatre with hundreds of civilians in the basement. Moscow denies targeting civilians, and, without evidence, says those incidents were faked.

"Before lunchtime, or after lunch, Azovstal will be completely under the control of the forces of the Russian Federation," Mr Ramzan Kadyrov, the head of Russia's republic of Chechnya, whose forces have been fighting in Ukraine, said of the steel plant.

Ukraine's defence ministry was not immediately available for comment.

A few dozen civilians managed to leave the strategically important south-eastern port on Wednesday in a small bus convoy, according to Reuters witnesses, escaping the fiercest battle of the war.

A Ukrainian marine commander Serhiy Volny said on Wednesday fighters at the steel works may not be able to hold out for much longer. President Volodymyr Zelensky has said an estimated 1,000 civilians are also sheltering there.

Ukraine is ready for a "special round of negotiations" with no conditions "to save our guys, (the far right) Azov (battalion), military, civilians, children, the living and the wounded," negotiator Podolyak tweeted.

Fighters remain holed up in the plant and have ignored an ultimatum by Russia to surrender. Mr David Arakhamia, a second negotiator, said in an online post that he and Mr Podolyak were in constant contact with Ukrainian forces in the city.

"Today, in a conversation with the city defenders, a proposal was put forward to hold direct negotiations, on site, on the evacuation of our military garrison," he said. "For our part, we are ready to arrive for such negotiations at any time as soon as we receive confirmation from the Russian side."

Fewer civilians than hoped left on Wednesday, according to the authorities.

Ukraine said it had so far held off an assault by thousands of Russian troops attempting to advance in what Kyiv calls the Battle of the Donbas, a new campaign to seize two eastern provinces Moscow claims on behalf of separatists.

Russia's forces had carried out strikes on dozens of military facilities in eastern Ukraine and had shot down a Ukrainian Mi-8 helicopter near the village of Koroviy Yar, its defence ministry said.

On Wednesday, Russia conducted a first test launch of its Sarmat intercontinental ballistic missile, a new and long-awaited addition to its nuclear arsenal.

Russia calls its incursion a "special military operation"to demilitarise and "denazify" Ukraine. Kyiv and its Western allies reject that as a false pretext.

The West has responded with a slew of sanctions.

The United States on Wednesday imposed restrictions on dozens of people and entities, including a commercial bank and a virtual currency mining company, targeting the evasion of existing rules.

US President Joe Biden will deliver an update on Ukraine at 1345GMT (9.45pm Singapore time) on Thursday as he works to complete a new arms package, which is likely to be a similar size to an US$800 million (S$1.1 billion) one announced last week, a US official said.

G7 finance ministers at a meeting on Wednesday said Russia should no longer participate in international forums, including G20, International Monetary Fund and World Bank meetings this week.

Top officials from Britain, the United States and Canada walked out on Russia’s representatives at a Group of 20 meeting in Washington, exposing deep divisions in the bloc of major economies.

Mariupol, once a prosperous city of 400,000, is now a wasteland where corpses lie in the streets and Russia was hitting the Azovstal steel plant with bunker-buster bombs, the government in Kyiv said.

Large black clouds of smoke billowed from there on Wednesday as evacuees queued to get onto buses.

Pensioner Tamara, 64, said she was going to stay with her sister in Zaporizhzhia. She was leaving the city with her husband, daughter, son-in-law and grandson.

"It is a pleasure ... to leave after this nightmare. We lived in basements for 30 days," she said tearfully.

Ukraine's Deputy Prime Minister Iryna Vereshchuk accused Russian forces of failing to observe a local ceasefire agreement long enough to allow large numbers of people to leave.

Russia did not immediately respond to the allegation.

It denies targeting civilians and has blamed Ukraine for the failure of earlier attempts to organise humanitarian corridors out of Mariupol.

The deputy commander of the Azov Regiment in Mariupol, Svyatoslav Kalamar, said several bunkers under the plant still held about 80-100 civilians each.

Just five people in Mariupol had surrendered following Moscow's 2pm (7pm Singapore time) surrender-or-die ultimatum, Russian-backed separatists said.

Ukraine has proposed swapping Russian prisoners of war in exchange for safe passage for trapped civilians and soldiers.

If Russia captured Mariupol it would link territory held by pro-Russian separatists in the east with the Crimea region that Moscow annexed in 2014.

Moscow was forced to retreat from northern Ukraine after an assault on Kyiv was repelled last month, but has poured troops back in for an assault on the east that began this week.

Russian leader Vladimir Putin says Ukraine mistreated Russian speakers in the Donbas, an accusation Kyiv dismisses as false.

Russia was focusing on advancing towards the strategically important Donbas city of Sloviansk, but "so far they are not succeeding", Ukrainian presidential advisor Oleksiy Arestovych said.

Meanwhile, peace negotiations have stalled.

British Prime Minister Boris Johnson said peace talks were likely to fail and world leaders, including US President Joe Biden, had agreed on a call this week that they would continue to supply Ukraine with weapons.