KYIV, April 21 (Reuters) - President Vladimir Putin on Thursday ordered the Russian military to cancel plans to storm the Azovstal steel plant inside the port city of Mariupol, where thousands of Ukrainian defenders and civilians are holed up.

Effectively declaring victory in the city after nearly two months of siege, Putin said there was no point in trying to root out the defenders barricaded inside the sprawling factory.

"I consider the proposed storming of the industrial zone unnecessary," he told his Defence Minister Sergei Shoigu in a televised meeting at the Kremlin. "I order you to cancel it."

"There's no need to climb into these catacombs and crawl underground through these industrial facilities," he said. "Block off this industrial area so that not even a fly can get through."

Shoigu estimated 2,000 Ukrainian fighters remained inside the plant. Putin called on them to surrender, saying Russia would treat them with respect.

Overnight, Mikhailo Podolyak, Ukraine's chief negotiator, proposed that talks be held inside Mariupol itself on the fate of its last defenders.

"Without any conditions. We’re ready to hold a 'special round of negotiations' right in Mariupol," he tweeted late on Wednesday.

"One on one. Two on two. To save our guys, Azov (battalion), military, civilians, children, the living & the wounded. Everyone. Because they are ours. Because they are in my heart. Forever."

The city of formerly 400,000 people on the Sea of Azov, under bombardment and siege since the war's earliest days, has been the scene of the heaviest fighting and worst humanitarian catastrophe of the conflict.