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Russian President Vladimir Putin left the door open to intervening in Ukraine Thursday in a thinly-veiled threat that coincided with the opening of crunch Geneva talks on the escalating crisis.
Warning that the former Soviet republic was plunging into the "abyss", Putin said he hoped not to have to use his "right" to send Russian troops into Ukraine, just hours after three pro-Moscow separatists were killed in an overnight gunbattle with Ukrainian troops.
The violence highlighted the urgency of talks in Geneva, which brought together the foreign ministers of Russia, the United States, the European Union and Ukraine.
The meeting comes after scores of pro-Kremlin separatists Kiev says are backed by Moscow took over parts of the restive southeast of the former Soviet republic.
"I very much hope that I am not obliged to use this right and that through political and diplomatic means we can solve all the acute problems in Ukraine," Putin said in his annual televised phone-in with the nation, in a signal the option was on the table.
The upper house of parliament on March 1 authorised the Russian leader to send troops into Ukrainian territory, a move that shocked financial markets at the time as well as diplomats.
Moscow went on to annex Ukraine's Russian-speaking Crimean peninsula, and now has tens of thousands of troops stationed on the border with its western neighbour.
But it denies backing the separatists currently wreaking havoc in the southeast and has warned Kiev's untested new leaders not to use force against them.
"I hope that they (participants in talks) manage to understand towards what abyss the Kiev authorities are going, dragging with them the whole country," Putin said.
Kiev launched a much-hyped military operation against separatists earlier this week, but it ended in failure when the insurgents humiliated Ukrainian troops by blocking them and seizing six of their armoured vehicles, to the obvious joy of many of the Russian-speaking locals.
NATO promptly announced it was deploying more forces in eastern Europe and urged Russia to stop "destabilising" Ukraine, which has been in turmoil since the ouster of pro-Kremlin president Viktor Yanukovych in February and now threatens to split between its EU-leaning west and Russian-speaking east.
- Decisive four-way showdown -
The situation in Ukraine has emerged as the biggest East-West crisis since the end of the Cold War.
Each side comes to the Geneva talks armed with a very specific set of demands, in what is likely to make negotiations between Russia's Sergei Lavrov, Ukraine's Andriy Deshchytsya, US Secretary of State John Kerry and EU foreign policy chief Catherine Ashton very tough.
The four diplomats were seated Thursday at a square table -- Lavrov and Deshchytsya facing each other -- and all are due to brief the press in the afternoon.
Washington and Kiev aim to get Moscow to demobilise the militias, and the United States warned Moscow on Wednesday that it risked fresh sanctions unless it made concessions.
But Moscow categorically denies having dispatched elite special forces to Ukraine to stir unrest, despite Kiev intelligence saying the same Russian agents who oversaw the seizure of Crimea last month are now coordinating the unrest in the southeast.
Instead, Russia blames Kiev's interim leaders -- installed by Ukraine's parliament in February after the overthrow of Yanukovych following months of protests -- for pushing the country dangerously close to a civil war.
- 'Consequences' if talks fail -
And in an ultimatum that puts pressure on Ukraine's struggling economy, Putin set a one-month deadline for Kiev to settle its debt for gas imports from Russia.
The European Union said meanwhile it had agreed to hold talks with Russia on its gas supplies to Europe through Ukraine, warning Moscow its reliability as an energy source was at stake.
The United States and European Union have already imposed punitive sanctions on key Russian and Ukrainian political and business officials, including members of Putin's inner circle.
But if the meeting ends in failure, Western countries are prepared to slap Moscow with tougher, broader economic and financial sanctions meant to hurt its already struggling economy.
White House spokesman Jay Carney said Wednesday that the United States was "actively preparing" new sanctions against Russia, with signs growing that Washington may be ready to target the country's key mining, energy and financial sectors.
US President Barack Obama specifically accused Moscow of supporting separatist militias.
"Each time Russia takes these kinds of steps that are designed to destabilise Ukraine and violate their sovereignty, there are going to be consequences," Obama told CBS News.
In the meantime, the situation on the ground in Ukraine continued to deteriorate.
In Mariupol, where the three separatists were killed, a further 63 were detained out of around 300 insurgents who attacked an interior ministry base using guns and petrol bombs.
The army unit that lost six armoured vehicles to militants on Wednesday was formally disbanded as Kiev's military reeled from its disastrous attempt to oust separatists.