MOSCOW/KYIV (Reuters) -Russia suggested on Monday that it was ready to keep talking to the West to try to defuse a security crisis in which it has massed a huge force within striking distance of Ukraine, while a Ukrainian official said Kyiv was prepared to make concessions.

In a televised exchange, President Vladimir Putin was shown asking his foreign minister, Sergei Lavrov, whether there was a chance of an agreement to address Russiaxe2x80x99s security concerns, or whether it was just being dragged into tortuous negotiations.

Lavrov replied: xe2x80x9cWe have already warned more than once that we will not allow endless negotiations on questions that demand a solution today.xe2x80x9d

But he added: xe2x80x9cIt seems to me that our possibilities are far from exhausted…At this stage, I would suggest continuing and building them up.xe2x80x9d

Washington has said Russia could invade Ukraine xe2x80x9cany day nowxe2x80x9d, and British Prime Minister Boris Johnson on Monday called the situation xe2x80x9cvery, very dangerousxe2x80x9d.

Russia has positioned more than 100,000 troops near to Ukrainexe2x80x99s borders but denies planning to invade, accusing the West, which has sent a flurry of officials to Moscow and Kyiv, of hysteria.

Western countries have already promised sanctions on an unprecedented scale if Russia does invade, and the Group of Seven large Western economies (G7) joined the chorus by warning of xe2x80x9ceconomic and financial sanctions which will have massive and immediate consequences on the Russian economyxe2x80x9d.

Ukrainexe2x80x99s ambassador to Britain backtracked on remarks suggesting that Kyiv would reconsider its attempt to join NATO – one of Russiaxe2x80x99s primary concerns – but did say that other concessions could be on offer.

STOCKS SLIDE

xe2x80x9cWe 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,xe2x80x9d he told the BBC in a clarification.

xe2x80x9cIt has nothing to do with NATO, which (membership application) is enshrined in the constitution.xe2x80x9d

The Kremlin said that Ukraine renouncing its aspiration to join the Western military alliance would significantly help address Russiaxe2x80x99s concerns.

Moscow has made clear it sees the former Soviet republicxe2x80x99s quest for closer ties with the West, notably through NATO, as a direct threat.

Eight years ago, mass protests on Kyivxe2x80x99s Maidan square in favour of closer integration with the West forced out pro-Russian president Viktor Yanukovych.

Faced with the ascendancy of pro-Western politicians promising to advance democracy and fight corruption just across its border, Russia captured and then annexed Ukrainexe2x80x99s Crimean peninsula, home to the Russian Black Sea fleet.

It also supported pro-Russian rebels who have seized part of Ukrainexe2x80x99s industrial, largely Russian-speaking east in a war that is still adding to its toll of more than 14,000 lives lost.

Mondayxe2x80x99s talk of diplomatic efforts continuing brought the price of crude oil down off the seven-year highs it had hit earlier amid concerns that sanctions would disrupt exports from Russia, a major producer, in an already tight market. [O/R]

Major European stock markets slumped by between 2% and 3%, but on Wall Street the S&P 500 index was down only 0.5% at 1545 GMT. [.N] [MKTS/GLOB] [EMRG/FRX] [RU/RUB]

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

ECONOMIC DAMAGE

Ukraine is already suffering economic damage from the standoff.

A surge in the price of 5-year credit default swaps on Ukrainian sovereign bonds suggested that markets gave Kyiv a 42% probability of defaulting.

Ukraine International Airlines, Ukrainexe2x80x99s biggest airline, said its insurers had terminated cover for at least some of its aircraft on flights in Ukrainian airspace.

Lavrov told Putin the United States had put forward concrete proposals on reducing military risks, but that responses from NATO and the European Union – which has been at pains not to let Moscow divide its members – had not been satisfactory.

An EU official, who asked not to be named but has spoken to Putin by phone in the past, said the EU was looking at alternative sources of energy in case Russia cut off supplies.

xe2x80x9cRussia is trying to demonstrate that it is the policeman in the region,xe2x80x9d the source said. xe2x80x9cThe criticism by Moscow against Ukraine is this idea that the people made a choice for liberal democracy, values, principles and freedoms.xe2x80x9d

German Chancellor Olaf Scholz held talks in Kyiv with President Volodymyr Zelenskiy, to be followed on Tuesday by a meeting with Putin in Moscow.

He said he saw xe2x80x9cno reasonable justificationxe2x80x9d for Russiaxe2x80x99s military activity on Ukrainexe2x80x99s border, and that xe2x80x9cwe are ready for a serious dialogue with Russia on European security issuesxe2x80x9d. He announced a credit of 150 million euros ($170 million) for Ukraine.

While Zelenskiy affirmed that Ukraine would not give up its push to join NATO, Scholz said it was strange that Russia had raised the issue just now, when it was xe2x80x9cnot on the agendaxe2x80x9d.

($1 = 0.8838 euros)