WASHINGTON/MOSCOW (REUTERS) - United States President Joe Biden and his Russian counterpart Vladimir Putin on Thursday (Dec 30) exchanged warnings over Ukraine but conveyed some optimism that upcoming diplomatic talks in January could help ease spiralling tensions.

In a 50-minute call, their second conversation this month, Mr Biden said he needed to see Russia de-escalate its military build-up near Ukraine, while President Putin said sanctions threatened by Washington and allies could lead to a rupture in ties. The call was requested by Mr Putin.

“President Biden reiterated that substantive progress in these dialogues can occur only in an environment of de-escalation rather than escalation,” said White House press secretary Jen Psaki.

"He made clear that the United States and its allies and partners will respond decisively if Russia further invades Ukraine," she said.

Kremlin aide Yuri Ushakov said the call created a good backdrop for future talks.

The leaders’ exchange set the stage for lower-level engagement between the countries, including a Jan 9 US-Russia security meeting, followed by a Russia-Nato session on Jan 12, and a broader conference including Moscow, Washington and other European countries slated for Jan 13.

Despite the talk of diplomacy, the tone of the call was described by officials on both sides as serious. And neither side detailed significant progress towards a resolution.

For his part, Mr Biden reiterated his threat of unprecedented sanctions if Russia chose to invade Ukraine.

Mr Biden laid out two paths, including diplomacy, said a senior administration official.

“The other is a path that is more focused on deterrence, including serious costs and consequences should Russia choose to proceed with a further invasion of Ukraine.”

Aides have said the possibilities include measures that would effectively disconnect Russia from the global economic and financial system, while further arming the Nato, or the North Atlantic Treaty Organisation, the European military alliance.

Mr Ushakov said Mr Putin immediately responded that any sanctions now or later “could lead to a complete breakdown in ties between our countries" and cause the most serious damage to relations between Russia and the West.

"Our president also mentioned that it would be a mistake that our descendants would see as a huge error," Mr Ushakov.

Moscow has alarmed the West by massing tens of thousands of troops near its border with Ukraine in the past two months, following its seizure of Ukraine’s Crimea peninsula in 2014 and its backing of separatists fighting in eastern Ukraine.

Russia denies planning to attack Ukraine and says it has the right to move its troops on its own soil as it likes.

Moscow, worried by what it says is the West’s re-arming of Ukraine, has said it wants legally-binding guarantees Nato will not expand further eastwards, and that certain offensive weapons will not be deployed to Ukraine or other neighbouring countries.

US concerns have not ebbed in recent weeks, according to a senior Biden administration official, despite a report over the weekend that Russia would be pulling back about 10,000 troops from its border with Ukraine. Other officials said they have seen little evidence Russia is pulling back from the border.

In his New Year’s speech, German Chancellor Olaf Scholz also firmly backed Ukraine by underlining the “inviolability of borders”, amid heightened fears of a Russian invasion.

The clear warning to Russia marks a rare message for a New Year’s speech typically dedicated to domestic issues.

“With a view on Ukraine, there are currently new challenges here. The inviolability of borders is a valuable asset – and non-negotiable,” Mr Scholz said.

He described transatlantic cooperation as indispensable for European security.
But he also called for greater international cooperation and for a “sovereign and strong Europe” capable of standing up for itself.

With Germany taking over the presidency of the Group of Seven from Jan 1, Mr Scholz said he will strive to make the group of wealthy nations “a pioneer for climate-neutral economies and a just world”.

Russia is set to hold talks on the guarantees it is seeking with the US in Geneva on Jan 10, with Nato in Brussels on Jan 12, and under the auspices of the Organisation for Security and Cooperation in Europe in Vienna on Jan 13.

Mr Ushakov said Thursday's phone call had created what he called a good atmosphere ahead of those talks.

Russia annexed Ukraine's Crimea in 2014 and backed a pro-Russian separatist uprising that same year which saw Kiev lose control over a swath of eastern Ukraine.

The call, which was requested by Mr Putin, began at 3.35pm Eastern time (4.35am Friday Singapore time) and ended 50 minutes later, according to US officials.