Western leaders warned Russia not to consider shifting a country's national borders by force, highlighting that Moscow would pay a high political and economic price for any military intervention in Ukraine.
Russia also on Saturday began strategic nuclear exercises involving launches of ballistic missiles, which it said were unrelated to deployments along Ukraine's border.
The annual exercises featured launches of Kinzhal and Tsirkon hypersonic missiles and a number of other weapons, the Kremlin said in a statement.
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"All the missiles hit their targets, confirming their performance objectives", a statement said, adding that the drills included Tu-95 bombers as well as submarines.
US Vice-President Kamala Harris said the United States would reinforce Nato's eastern flank to act as a further deterrent to any Russian military action in addition to the threat of sanctions.
A Tu-22M3 bomber of the Russian air forces flies over the Mediterranean. AP
"National borders should not be changed by force," Harris said at the Munich Security Conference on Saturday.
"We have prepared economic measures that will be swift, severe, and united," she said. "We will target Russia's financial institutions and key industries."
Security officials have warned that Russia has forces in place to invade Ukraine at any moment, and said Moscow could be seeking to create an excuse to invade with a so-called false flag operation.
Vladimir Putin (right) and Alexander Lukashenko watch military drills via videoconference in Moscow. AP
Russia opened an investigation on Saturday into Russian media reports that a Ukrainian shell exploded in Russia's region of Rostov about 1 kilometre from the border.
DIPLOMACY
Leaders at the Munich conference said they wanted to continue dialogue with Russia, with German Chancellor Scholz saying there were clear indications Russia was still open to diplomacy.
They received some support from Chinese Foreign Minister Wang Yi, whose country has close ties with Russia, when he told the conference no country should seek to replace international norms with its own will. He said no country should be obsessed with turning back the wheel of history.
German Chancellor Olaf Scholz said Russian President Vladimir Putin was wrong to seek justification for revising borders in history.
"If you go back far enough in the history books you can find grounds for wars that last a few hundred years and destroy our entire continent," Scholz said at the conference.
Smoke rises over a field during the Union Courage-2022 Russia-Belarus military drills. AP
Nato Secretary-General Jens Stoltenberg said he had sent a letter to Russian Foreign Minister Sergei Lavrov offering more talks to defuse the Ukraine crisis but warned Moscow of the dangers of making impossible security demands.
He also told the conference there were no signs of a Russian withdrawal from the borders of Ukraine — despite Russia's assertion this week that it had begun withdrawing troops.
"We are extremely concerned because we see that they continue to build up, they continue to prepare. And we have never in Europe seen since the end of the Cold War, such a large concentration of combat-ready troops," he said.
In a rare admission of the limits of diplomacy, Stoltenberg also said Moscow was putting forward security demands that the Kremlin knew Nato could never meet.
"Russia has made the issue of Ukraine's possible Nato membership a casus belli, which is a paradox because there is no decision on this on the agenda," Scholz said. "We will differentiate clearly between untenable demands and legitimate security interests."
In the stand-off over Ukraine, Russia has sent tens of thousands of troops near the border with its neighbour while insisting it has no plans to invade.