By James Mackenzie, Natalia Zinets and Oleksandr Kozhukhar
KYIV/LVIV, Ukraine (Reuters) - U.S. President Joe Biden on Wednesday called Russian leader Vladimir Putin a war criminal in comments the Kremlin said were "unforgivable" as it insisted the war in Ukraine was "going to plan" amid talk of compromise at peace talks.
Kremlin forces kept up their bombardments of besieged cities, including intensified shelling of the capital Kyiv, and civilians waiting in line for bread and sheltering in a theatre were killed, according to U.S. and Ukrainian officials
Moscow has yet to capture any of Ukraine's biggest cities following its invasion that began on Feb. 24, the largest assault on a European state since World War Two, raising fears of wider conflict in the West.
Putin on Wednesday said he would discuss neutral status for Ukraine and that what he calls a "special military operation" to demilitarize the country was "going to plan". Kyiv and allies say his actions are an unprovoked incursion, and more than 3 million Ukrainians have fled and hundreds have died.
The United States announced an additional $800 million in security assistance to Ukraine to fight Russia, with the new package including drones, anti-armour and anti-aircraft systems.
"More will be coming as we source additional stocks of equipment that ... we are ready to transfer," Biden said, later condemning Putin.
"He is a war criminal," he told reporters.
Kremlin spokesman Dmitry Peskov said the comment was "unacceptable and unforgivable rhetoric", according to Tass news agency.
Ukraine still hopes for a diplomatic solution. President Volodymyr Zelenskiy said negotiations were becoming "more realistic" and Russia said proposals under discussion were "close to an agreement."
The U.S. Embassy in Kyiv said Russian forces had shot dead 10 people waiting in line for bread in Chernihiv, northeast of Kyiv. Russia denied the attack and said the incident was a hoax.
Emergency services said rescue workers had found the bodies of five people during searches of shell-hit buildings.
In the besieged southern port of Mariupol, the city council said Russian forces bombed a theatre where civilians were sheltering. The number of casualties was not known.
Russia denied it had carried out an air strike against the theatre. Reuters could not independently verify the information.
Maxar Technologies (NYSE:MAXR), a private U.S. company, distributed satellite imagery that it said was collected on March 14 and showed the word "children" in large Russian script painted on the ground outside the red-roofed Mariupol Drama Theatre.
FACEBOOK POSTS REMOVED
The governor of Zaporizhzhia region said Russian forces had fired artillery at a convoy of evacuees from Mariupol, wounding five people on Wednesday.
Three people were killed and five wounded after shelling caused a fire at a market in eastern Kharkiv, Ukraine's second city, emergency services said.
Deputy Prime Minister Iryna Vereshchuk said 400 staff and patients were being held hostage at a Mariupol hospital that Russian forces captured on Tuesday.
Moscow denies targeting civilians.
Kyiv's Mayor Vitali Klitschko said Russian shelling caused a fire and damaged private homes and a gas line in the evening after early morning barrages.
Russian troops have halted at the gates of the capital after taking heavy losses.
Ukraine handed over nine captured soldiers to secure the freedom of the mayor of the city of Melitopol, who was detained last week, the Interfax Ukraine news agency quoted a senior official as saying on Wednesday.
And as an information battle goes on alongside fighting, Facebook (NASDAQ:FB) on Wednesday removed official Russian posts that falsely claimed reports of Russia bombing a children's hospital in Ukraine were a hoax.
Russia has shifted its stance over the bombing that caused outrage around the world with a mix of statements that veered between aggressive denials and a call to establish clear facts.
'DARKEST TIME'
In a speech to the U.S. Congress by video link, Zelenskiy repeated a request for a no-fly zone over Ukraine, something the West won't introduce.
"In the darkest time for our country, for the whole of Europe, I call on you to do more," he said.
NATO defence ministers meeting in Brussels pledged more arms supplies to help Ukraine.
The U.N. Security Council is due to vote on Friday on a Russian-drafted call for aid access and civilian protection, but diplomats say the measure is set to fail because it does not push for an end to the fighting or withdrawal of troops.
Delegations from the two sides were meeting via video conference, Russian Foreign Minister Sergei Lavrov said on Wednesday as efforts continued for a diplomatic solution.
The Kremlin said negotiators were discussing a status for Ukraine similar to that of Austria or Sweden, both members of the European Union that are outside the NATO military alliance.
Ukraine's chief negotiator said Kyiv was still demanding a ceasefire and the withdrawal of Russian troops, with guarantees.
Zelenskiy has said Ukraine could accept international security guarantees that stopped short of its longstanding aim to join NATO. That prospect has been one of Russia's primary concerns.
"Neutral status is now being seriously discussed along, of course, with security guarantees," Lavrov said. "There are absolutely specific formulations which in my view are close to agreement."
Vladimir Medinsky, Russia's chief negotiator, told state TV: "Ukraine is offering an Austrian or Swedish version of a neutral demilitarised state, but at the same time a state with its own army and navy."
Kremlin spokesman Dmitry Peskov said the idea "could really be seen as a compromise".
Austria and Sweden, the biggest of six EU members outside NATO, both have small militaries that cooperate with the alliance.
DAMAGE TO RUSSIA'S ECONOMY
Ukrainian forces have withstood an assault by a much larger army but the humanitarian toll is rising.
Ukraine said about 20,000 people had escaped besieged Mariupol in cars, but hundreds of thousands remain trapped.
The economic fallout is also being felt around the world.
The Biden administration has authorized additional exports of liquefied natural gas from Texas-based Cheniere Energy (NYSE:LNG) in a move that could help Europe deal with a worsening crunch.
Meanwhile, Russia was due to pay $117 million in interest on dollar-denominated sovereign bonds but may pay in roubles instead, amounting to its first default on foreign debt since the Bolshevik revolution.
Moscow said it had the money, and Washington would be to blame if it cannot pay.
In his most explicit acknowledgment of the pain inflicted by Western sanctions, Putin said inflation and unemployment would rise, and structural changes to the economy would be needed.