Vladimir Putin has said Russian forces could conquer the Ukrainian capital, Kiev, in two weeks if he so ordered, the Kremlin has confirmed.

Moscow declined to deny that the president had spoken of taking Kiev in a phone conversation on Friday with José Manuel Barroso, the outgoing president of the European commission.

Yuri Ushakov, a Kremlin foreign policy adviser, said on Tuesday that the Barroso leak had taken Putin's remarks out of context.

"This is incorrect, and is outside all the normal framework of diplomatic practice, if he did say it. This is simply not appropriate for a serious political figure," he said of the Barroso leak, according to the Russian Interfax news agency.

EU leaders held a summit on Saturday to decide who should run the union for the next five years, but the session was quickly preoccupied by Putin's invasion of Ukraine and how to respond.

Barroso told the closed meeting that Putin had told him Kiev would be an easy conquest for Russia, according to the Italian newspaper, La Repubblica. According to the account, Barroso asked Putin about the presence of Russian troops in eastern Ukraine. Nato says there are at least 1,000 Russian forces on the wrong side of the border. The Ukrainians put the figure at 1,600.

"The problem is not this, but that if I want I'll take Kiev in two weeks," Putin said, according to La Repubblica.

The Kremlin did not deny Putin had spoken of taking Kiev, but instead complained about the leak of the Barroso remarks.

Petro Poroshenko, the Ukrainian president, attended the EU summit and painted an apocalyptic picture of the conflict, with EU leaders dropping their usual public poise in a heated debate.

Dalia Grybauskaite, the Lithuanian president, declared Russia was "at war with Europe". The German chancellor, Angela Merkel, the main mediator with Putin, was said to be furious with the Russian leader, warning that he was "irrational and unpredictable", while David Cameron was said to have raised the issue of Britain discussing policy options regarding Putin.

Cameron likened the west's dilemma with Putin to relations between the then British prime minister, Neville Chamberlain, with Adolf Hitler in Munich in 1938, when Anglo-French appeasement encouraged the Nazi leader to launch the second world war the following year.

"We run the risk of repeating the mistakes made in Munich in 1938. We cannot know what will happen next," Cameron was reported as saying. "This time we cannot meet Putin's demands. He has already taken Crimea and we cannot allow him to take the whole country."

Merkel pointed to the dangers for the Baltic states on Russia's western borders, home to large ethnic Russian minorities. She said Estonia and Latvia could be Putin's next targets, according to La Repubblica.

Defence of the two countries – both of which are Nato and EU members and part of the euro single currency zone – is the centrepiece of this week's Nato summit in Wales and the alliance is said to view that defence as a red line which Putin dare not cross. The US president, Barack Obama, is to deliver a speech in Estonia on Wednesday repeating that message.

The main decisions facing the Nato summit in Newport include deploying rapid response Nato spearhead units to the Baltic and Poland if necessary, stockpiling arms and equipment in the region, and strengthening the Nato presence in the east.

The plans call for units of up to 5,000 forces to be deployed within two to five days, according to a senior military official at Nato.

To try to avoid a bigger legal dispute with Russia, the Nato presence in the east will not be called permanent – proscribed under a Nato-Russia pact from 1997 – but back-to-back rotation of alliance forces will mean there is a persistent presence, according to a senior Nato diplomat.

If the Baltics and Polish are reassured by Nato, there will be little short-term comfort for Ukraine at the summit, which Poroshenko will also attend.

"It's not actually Nato's job to be the police officer of Europe. Nato is not the first responder on this," the diplomat said. "Nato's planning is all about how to defend allies, not partners like Ukraine."

At the weekend, Grybauskaite demanded that the west arm Ukraine. That is unlikely. "Nato is not going to launch a defence capacity-building mission in Ukraine," said the diplomat.

The summit is also expected to take Nato membership bids by four former Soviet states off the table in order to not antagonise Putin.

Russia is certain to respond to the Nato moves in eastern Europe, though it is not yet clear how.

"Nato's planned action … is evidence of the desire of US and Nato leaders to continue their policy of aggravating tensions with Russia," said Mikhail Popov, a Kremlin military official. Russia's military posture would be adapted appropriately.