UPDATE 4-‘Serious’ talk between Biden and Putin sets stage for diplomacy

(Adds comments from U.S., Russian officials, background)

By Jarrett Renshaw and Vladimir Soldatkin

WILMINGTON, Del./MOSCOW, Dec 30 (Reuters) – U.S. President Joe Biden and his Russian counterpart Vladimir Putin on Thursday exchanged warnings over Ukraine but conveyed some optimism that upcoming diplomatic talks in January could help ease spiraling tensions.

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

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. 9/10 U.S.-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, Biden reiterated his threat of unprecedented sanctions if Russia chose to invade Ukraine.

“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 North Atlantic Treaty Organization, the European military alliance.

Ushakov said Putin “immediately responded” that any sanctions now or later “could lead to a complete breakdown in ties between our countries.”

He added: “Our president also mentioned that it would be a mistake that our descendants would see as a huge error.”

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 neighboring countries.

U.S. 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.

(Additional reporting by Andrea Shalal in Washington and Moscow bureau; Writing by Trevor Hunnicutt; Editing by Mary Milliken and Daniel Wallis)