By Dmitry Antonov and Pavel Polityuk

MOSCOW/KYIV (Reuters) - President Joe Biden said on Thursday there was now every indication Russia was planning to invade Ukraine in the next few days and was preparing a pretext to justify it, after Ukrainian forces and pro-Moscow rebels traded fire in eastern Ukraine.

The Kremlin accused Biden of stoking tension and released a strongly worded letter that said Washington was ignoring its security demands and threatened unspecified "military-technical measures".

Moscow also ordered the expulsion of the number two official from the U.S. embassy.

Early morning exchanges of fire between Ukraine and pro-Russian separatists - who have been at war for years and where a ceasefire is periodically violated - triggered alarm. Western officials who have long warned that Moscow could try to create a scenario to justify an invasion said they believed that was now unfolding.

"We have reason to believe they are engaged in a false flag operation to have an excuse to go in. Every indication we have is they're prepared to go into Ukraine and attack Ukraine," Biden told reporters at the White House.

"My sense is this will happen in the next several days."

Biden ordered Secretary of State Antony Blinken to change his travel plans at the last minute to speak at a United Nations Security Council meeting on Ukraine.

Blinken outlined to the Council what he said were possible scenarios Russia could create to justify an invasion.

"This could be a violent event that Russia will bring on Ukraine, or an outrageous accusation that Russia will level against the Ukrainian government," Blinken said.

"It could be a fabricated so-called terrorist bombing inside Russia, the invented discovery of a mass grave, a staged drone strike against civilians, or a fake - even a real - attack using chemical weapons. Russia may describe this event as ethnic cleansing, or a genocide."

Russian Deputy Foreign Minister Sergei Vershinin said Blinken's comments were regrettable and dangerous and that some Russian soldiers were returning to home bases. Russia also distributed a letter to U.N. Security Council members accusing Ukrainian authorities of "exterminating" civilians in the east.

'Hysteria'

Russia denies planning to invade its neighbor and has accused Western leaders of hysteria. This week it said it was pulling back some of the more than 100,000 troops it has massed near the frontier with Ukraine and on Thursday it said some had returned to bases from Crimea, which Russia annexed from Ukraine in 2014.

Washington says Russia is not withdrawing, but in fact sending more forces. White House spokesperson Karine Jean-Pierre said on Thursday Washington had confirmed that Russia had added 7,000 troops to its presence at the Ukrainian border over the past 24 hours, a cause of "serious concern".

"We see them fly in more combat and support aircraft. We see them sharpen their readiness in the Black Sea," Defense Secretary Lloyd Austin said at NATO headquarters in Brussels. "We even see them stocking up their blood supplies."

"I was a soldier myself not that long ago. I know firsthand that you don't do these sorts of things for no reason," said Austin, a retired Army general. "And you certainly don't do them if you're getting ready to pack up and go home."

Russia's defence ministry released video it said showed more Russian units leaving the area near the border.

Maxar Technologies, a private U.S. company that has been tracking the build-up, said satellite images showed that, while Russia has pulled back some military equipment from near Ukraine, other hardware has arrived.

Donbass Shelling

Ukraine and pro-Russian rebels gave conflicting accounts of shelling across the front in the Donbass separatist region. The details could not be established independently, but reports from both sides suggested an incident more serious than the routine ceasefire violations that are often reported in the area.

Kremlin spokesperson Dmitry Peskov said Moscow was "seriously concerned" about the reports of an escalation. Russia has long accused Kyiv of planning to provoke escalation as an excuse to seize rebel territory by force, which Ukraine denies.

Ukraine's President Volodymyr Zelenskiy said the pro-Russian forces had shelled a kindergarten, in what he called a "big provocation". Video footage released by Ukrainian police showed a hole through a brick wall in a room scattered with debris and children's toys.

"Some provocations were planned for today, we expected them and thought that a war had begun," Dmytro, a resident of the village of Stanytsia Luhanska, told Reuters.

The separatists, for their part, accused government forces of opening fire on their territory four times in the past 24 hours.

Neither account could be verified. A Reuters photographer in the town of Kadiivka, in Ukraine's rebel-held Luhansk region, heard the sound of some artillery fire from the direction of the line of contact, but was not able to determine details.

'Forced To Respond'

Russia delivered a letter to the U.S. ambassador accusing Washington of having ignored its security demands, which include promising never to allow Ukraine to join NATO.

"In the absence of the readiness of the American side to agree on firm, legally binding guarantees of our security from the United States and its allies, Russia will be forced to respond, including through the implementation of military-technical measures," the document said.

Blinken said Washington was evaluating the letter and that he had earlier sent a letter to Russian Foreign Minister Sergei Lavrov proposing a meeting next week in Europe to try to resolve the crisis.

Such a meeting would be the latest in a flurry of high-level talks in recent weeks to avert an escalation into war.

The U.S. State Department said the ejection of Deputy Chief of Mission Bart Gorman from the U.S. embassy in Moscow was unprovoked and it was considering its response.

Russia said it had ordered the diplomat out in response to the U.S. expulsion of a senior official at the Russian embassy in Washington, who it said was forced to leave before a replacement could be found as part of a U.S. "visa war".

(Reporting by Reuters bureaux. Writing by Peter Graff, Mark Trevelyan and Philippa FletcherEditing by Alex Richardson, Gareth Jones and Frances Kerry)