MOSCOW (AFP, REUTERS) - President Vladimir Putin said on Thursday (Dec 23) that Washington's willingness to discuss Russia's security proposals aimed at curbing North Atlantic Treaty Organisation's (Nato) eastward expansion was "positive", as fears mount in the West over a major military escalation in Ukraine.

The Kremlin has grown increasingly insistent that the West and Nato are encroaching dangerously close to Russia's borders.

Moscow presented the West with sweeping security demands last week, saying Nato must not admit new members and barring the United States from establishing new bases in former Soviet countries.

Washington responded that it is willing to discuss the security proposals, but disagrees with part of them and insists European allies must be part of the talks.

"The ball is in their court. They need to provide us with some answer," Mr Putin said at his annual end-of-year press conference.

But he added: "Overall, we see a positive reaction."

Mr Putin said Washington is ready for talks at the start of next year in Geneva, adding that representatives from both sides have been appointed.

The growing tensions peaked this week when Mr Putin vowed that Russia would take "appropriate retaliatory" military steps in response to what he called the West's "aggressive stance".

He also said a new arsenal of hypersonic missiles that he has previously described as "invincible" was nearing combat readiness.

Tensions have been building since mid-November when Washington sounded the alarm over a massive Russian troop build-up around Ukraine and accused Mr Putin of planning an invasion.

The West has long accused the Kremlin of providing direct military support to pro-Russia separatists in eastern Ukraine, who seized two regions shortly after Moscow annexed Crimea in 2014.

Russia denies the claims and Mr Putin has suggested that the conflict, which has claimed over 13,000 lives, is genocidal.

Mr Putin said it was impossible to have good ties with the current Ukrainian government and that President Volodymyr Zelensky had come under the influence of "radical forces".

Mr Zelensky this week said he was ready to talk with Russia "in any format", which the Kremlin has so far rejected.

Besides the growing tensions, Mr Putin on Thursday addressed an unprecedented wave of arrests against voices critical of the Kremlin, saying the crackdown is aimed at curbing foreign influence.

"I remind you of what our adversaries have been saying for centuries: Russia cannot be defeated, it can only be destroyed from within," he said.

He added that it was domestic dissent that brought about the collapse of the Soviet Union 30 years ago this month.

The press conference kicked off with Mr Putin fielding questions on the coronavirus pandemic and its economic fallout.

Rattling off facts and figures to apparently illustrate Russia's prowess, Mr Putin hailed his country's response, saying: "We have recovered much faster than others."

He expected growth of about 4.5 per cent next year, continuing Russia's 2021 rebound. That was due largely to officials avoiding strict lockdowns, a policy that some say has contributed to over 520,000 Russians dying from Covid-19, according to a count by state statistic agency Rosstat - more than in any European country.

Mr Putin called the situation worrying on Thursday and complained about Russia's level of herd immunity, saying it was at 59.4 per cent - a figure calculated by counting both people who had been inoculated and infected.

The authorities have faced a vaccine-sceptic population, and Mr Putin once again urged Russians to get inoculated.

Mr Putin also said on Thursday that Germany was reselling Russian gas to Poland and Ukraine rather than relieving an overheated market, adding Moscow was not to blame for Europe's gas price crisis.

European spot gas prices hit another all-time high this week after the Yamal pipeline that normally brings Russian gas to heat homes and power electricity generation in Germany reversed direction and started to flow into Poland.

Germany receives Russian gas through several routes, including Yamal and the undersea Nord Stream 1 pipeline, and two major German customers said this week that Russian supplier Gazprom was meeting its contractual obligations.

"Gazprom is supplying all volumes requested under existing contracts," Mr Putin said.

Russia has consistently defended its long-term contracts, saying they guarantee stable volumes and prices.

When it sees requests, Gazprom buys extra export capacity, which is in addition to long-term deals, at auctions which is for delivery through the Yamal pipeline and Ukraine.

But Gazprom has not booked additional capacity for Yamal shipments for December or at daily auctions so far this week, and Yamal flows continued in reverse for a third day on Thursday, while shipments through Ukraine were also down.

"Gazprom did not book this traffic as its customers, above all German and French companies, who buy gas via this (Yamal) route, did not put purchase requests forward," Mr Putin said on Thursday.

"They turned this (Yamal) route into reverse from Germany to Poland... Why? Because we supply gas to Germany under long-term contracts and the price is three to four, (even) six to seven times cheaper than on spot. Just reselling 1 billion cubic metres (bcm) one can earn US$1 billion."

Germany's Economy Ministry declined to comment. Gazprom increased exports to Europe by 7 per cent in January-November, with Germany buying 5.6 bcm more than a year ago - the volumes Mr Putin said Germany was reselling to Poland and of which some three million cubic metres per day ending up in Ukraine.

"Instead of shipping gas to Poland and then to Ukraine... wouldn't it be better to ship it further to Europe and impact the spot price?" Mr Putin said.

The Yamal reverse has coincided with Gazprom filling the newly-completed Nord Stream 2 pipeline under the Baltic Sea, which does not pass through Ukraine, in preparation for it to begin supplying gas to Europe some time next year.

Some countries have said the activities are linked, but Russia has repeatedly denied any connection between the Yamal flows and priming Nord Stream 2, which is opposed by Ukraine and the United States and is awaiting a green light from Germany.

Russia said the reversal was not political. The front-month wholesale Dutch gas price, which is the European benchmark, eased to 140 euros (S$215.52) per megawatt hour on Thursday, down by 15 per cent.

Traders said news of several shipments of liquefied natural gas (LNG) cargoes heading to Europe had provided some respite although prices are up more than 600 per cent from the start of 2021.

But Russian brokerage Aton said in a note that significant relief was not expected anytime soon, as gas withdrawals from storage in Europe were at 762 million cubic metres, the highest since the start of the heating season.

LNG tankers started to divert from Asia to Europe as prices rocketed, with at least ten cargoes heading west.

Gas prices fuel power bills and are adding to already high global inflation, which Russia has said may backfire in its own economy where consumer prices growth has already hit its highest in nearly six years.