WRAPUP 11-Ukraine clings to Bakhmut, Blinken tells Lavrov US to back Kyiv all the way

(Adds US on Ukraine aide, Biden-Scholz talks)

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Battle for Bakhmut turning to war's bloodiest

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Mercenary boss says video shows his fighters near city centre

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War dominates meeting of G20 foreign ministers in India

By Leonardo Bennasatto and Lisi Niesner

CHASIV YAR, Ukraine, March 2 (Reuters) - Ukrainian forces held out in the eastern city of Bakhmut against Russian attackers on Thursday, while the top U.S. diplomat told Russia's foreign minister in their first in person encounter since the invasion that the Kremlin must stop the war.

In Moscow, President Vladimir Putin said Russia had been hit by what he called a terrorist attack in its southern Bryansk region bordering Ukraine.

Putin vowed to crush what he said was a Ukrainian sabotage group that had fired at civilians. Russia's FSB security force said later that the situation there was "under control".

Near the front lines west of Bakhmut, in the Ukrainian-held town of Chasiv Yar, the thump of outgoing artillery fire could be heard on Thursday morning.

In nearby towns and villages, new trenches had been dug on the roadside 20-40 metres (65-130 feet) apart, a sign that Ukrainian forces were strengthening defensive positions west of the ruined city.

Residents trickled out of the area, carrying bags.

"We remained until the very last. We wanted to stay. But how can we? Our neighbour's flat has now been destroyed. It is time to go," Svitalana, 47, told Reuters journalists.

WASTELAND

Bakhmut has been reduced to a blasted wasteland, with a few thousand of its 70,000 pre-war civilian population still inside as armies battle street-by-street.

Russian troops, bolstered by mercenaries of the Wagner private army, have been advancing north and south of the city to cut it off.

Moscow, which lost territory throughout the second half of 2022, says taking Bakhmut would be a step towards seizing the rest of the surrounding industrial Donbas region.

Ukraine says the city has limited strategic value but it is exhausting Russia's invasion force in what has become the bloodiest battle of the war.

"Sooner or later, we will probably have to leave Bakhmut. There is no sense in holding it at any cost," Ukrainian lawmaker Serhiy Rakhmanin said late on Wednesday. The aim was to "inflict as many Russian losses as possible".

In Washington, national security spokesman John Kirby said U.S. President Joe Biden and German Chancellor Olaf Scholz will discuss Ukraine's needed assistance when they meet on Friday at the White House. The United States will announce a new military aid package for Ukraine on Friday, Kirby said.