U.S. Secretary of State Antony Blinken and Russia's Foreign Minister Sergei Lavrov have met in Sweden, amid rising tensions over Ukraine, with both sides issuing warnings about the risk and consequences of military confrontation.

Washington, NATO and Kyiv have repeatedly expressed fears in recent weeks that Russia will soon launch a new attack on Ukraine, an idea Moscow has rejected as fear-mongering.

Russia annexed Ukraine's Crimea in 2014 and has backed pro-Russia separatists who seized a swath of eastern Ukraine that same year. 

Russia's President Vladimir Putin this week warned NATO against placing missile defence systems in Ukraine.

BLINKEN'S WARNING

Blinken warned Lavrov of the "serious consequences" Russia would suffer if it invaded Ukraine and to urge him to seek a diplomatic exit from the crisis.

Blinken delivered the warning in person at a meeting of the Organisation for Security and Cooperation in Europe (OSCE) in Stockholm, a day after declaring that Washington was ready to respond resolutely, including with hard-hitting sanctions, in the event of a Russian attack.

"The best way to avert the crisis is through diplomacy, and that's what I look forward to discussing with Sergei," Blinken told reporters before going into talks with Lavrov.

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'NIGHTMARE' OF CONFRONTATION

Earlier, Lavrov had warned that Europe was returning to what he called the nightmare of military confrontation.

"The architecture of strategic stability is rapidly being destroyed, NATO refuses to constructively examine our proposals to de-escalate tensions and avoid dangerous incidents," Lavrov told the OSCE summit.

"On the contrary, the alliance's military infrastructure is drawing closer to Russia's borders. The nightmare scenario of military confrontation is returning," he said. 

"Turning our neighboring countries into bridgeheads of confrontation with Russia and deploying NATO forces in direct proximity to areas of strategic importance for our security is categorically unacceptable," he said.

Lavrov said that Western arms shipments to Ukraine were encouraging Kyiv to think it could resolve its territorial problems by force. Kyiv has denied it has such plans. Lavrov said Moscow also feared that intermediate-range U.S. missiles could appear in Europe.

Lavrov said Moscow would soon put forward proposals for a new European security pact, which he said he hoped would stop NATO from expanding further eastwards.

'SPIES' ARRESTED

Adding to regional tensions, Russia said on Thursday it had arrested three suspected Ukrainian intelligence agents, including one accused of planning to carry out an attack using two homemade bombs, allegations that Kyiv dismissed as trumped up.

Russia's FSB security service said in a statement that a suspected Ukrainian military intelligence officer had been arrested after being caught "red-handed" with two bombs that had been smuggled over the border.

It said two others, suspected agents of the Security Service of Ukraine (SBU), had sought to gather intelligence in Russia and film transport infrastructure and strategically important enterprises.

Ukraine's military intelligence service declined to comment. The SBU denied the Russian allegations. "Such statements by the FSB should be viewed exclusively through the prism of hybrid war, in which ... propaganda and the spread of fakes play an important role," it said.

DIPLOMATS TOLD TO LEAVE

The latest developments follow an announcement by Russia on Wednesday that it was ordering U.S. Embassy staff who have been in Moscow for more than three years to fly home by January 31, a retaliatory move for a U.S. decision to limit the terms of Russian diplomats.

The step, the latest in an escalating diplomatic row, comes after Russia's ambassador to the U.S. said last week that 27 Russian diplomats and their families were being expelled from the United States and would leave on Jan. 30.

Washington said the diplomats were not expelled but had been in the country for longer than a new three-year limit.

"We ... intend to respond in the corresponding way. U.S. Embassy employees who have been in Moscow for more than three years must leave Russia by January 31," Foreign Ministry spokesperson Maria Zakharova told a briefing.