Winter War
Likewise, the delegation demanded the cession of islands in the Gulf of Finland as well as Rybachy Peninsula (Finnish: Kalastajasaarento). The Finns would also have to lease the Hanko Peninsula for 30 years and to permit the Soviets to establish a military base there. In exchange, the Soviet Union would cede Repola and Porajärvi from Eastern Karelia (2120 square miles), an area twice the size as that of the territory demanded from Finland (1000 square miles).
The Soviet offer divided the Finnish government: Gustaf Mannerheim had argued for an agreement, being pessimistic of the Finnish prospects in a war against the Soviet Union. But the Finnish government was reticent in reaching an agreement out of mistrust for Stalin: there was a fear of repeated follow-up demands, which would have put the future of Finnish sovereignty in danger. There were also those, such as Foreign Minister Eljas Erkko and Prime Minister Aimo Cajander, and the Finnish intelligence in general, who mistook the demands and the Soviet military build-up as a mere bluff on the part of Stalin, and were thus disinclined to reach an agreement.
The Finns made two counteroffers to cede the Terijoki area to the Soviet Union. That would double the distance between Leningrad and the Finnish border but was far less than the Soviets had demanded. The Finns would also cede the islands in the Gulf of Finland, but they would not agree to lease any territory to the USSR for military purposes.
On the next meeting on 23 October, Stalin conceded to lessen his demands: a reduction in the amount of land demanded in Karelia; a reduction of the Hanko garrison from 5000 to 4000 men; and reducing the length of lease from 30 years to whatever date the ongoing (second world) war in Europe would end. However, this sudden change, contrary to previous statements that Soviet demands were minimalist and thus unalterable, had surprised the Finnish government, and lead them to believe more concession may be forthcoming. Thus, Paasikivi's idea of reaching some sort of compromise by offering the Soviets the island of Jussarö and the fort of Ino were refused by Helsinki.
On 31 October, Molotov publicly announced the Soviet demands to the Supreme Soviet. This surprised the Finns, and lent credibility to Soviet claims that their demands were minimalist and thus unalterable, as it would have been impossible to reduce them without a loss of prestige after having made them public. However, the Soviet offer was eventually rejected with respect to the opinion of the public and Parliament.
At the meeting on 9 November, Paasikivi announced to the attending Stalin and Molotov the Finnish refusal to accept even their reduced demands. The Soviets were visibly surprised. Finnish Foreign Minister Vaino Tanner later wrote that "the eyes of our opposite numbers opened wide". Stalin had asked "You don't even offer Ino?" This would become the final meeting: the Soviets stopped responding to further Finnish letters and on 13 November, when the Finnish delegation was recalled from Moscow, no Soviet officials came to see them off. The Finns had left under the expectation that the negotiations would continue. Instead, the Soviet Union ramped up its military preparations.
The negotiations had failed, as neither side was willing to substantially reduce their demands, nor was either side able to fully trust the other. The Finns were fearful of an encroachment on their sovereignty, while the Soviets were (claiming to be) fearful of a springboard for international enemies in Finland, in close proximity to Leningrad. No promises to the contrary managed to persuade the other. Additionally, both sides had misunderstood the others position: the Finns had assumed that the Soviets had opened up on a maximalist demand, ready to be traded down smaller. The Soviets instead had stressed the minimalist nature of their demands, and were incredulous over Finnish reluctance to agree. Finally, there was also Stalin's unwillingness or inability to accept that any territorial concessions on the part of Finland would have only been possible by a 4/5th majority in the Finnish parliament. He had mocked such a requirement, proposing that they count his and Molotov's votes, too.

Shelling of Mainila and Soviet intentions: On 26 November 1939, an incident was reported near the Soviet village of Mainila, near the border with Finland. A Soviet border guard post had been shelled by an unknown party resulting, according to Soviet reports, in the deaths of four and injuries of nine border guards. Research conducted by several Finnish and Russian historians later concluded that the shelling was a false flag operation since there were no artillery units there, and it was carried out from the Soviet side of the border by an NKVD unit with the purpose of providing the Soviets with a casus belli and a pretext to withdraw from the non-aggression pact. Soviet war games held in March 1938 and 1939 had been based on a scenario in which border incidents taking place at the village of Mainila would spark the war.

Molotov claimed that the incident was a Finnish artillery attack. He demanded that Finland apologise for the incident and to move its forces beyond a line 20–25 km (12–16 mi) from the border. Finland denied responsibility for the attack, rejected the demands and called for a joint Finnish–Soviet commission to examine the incident. In turn, the Soviet Union claimed that the Finnish response was hostile, renounced the non-aggression pact and severed diplomatic relations with Finland on 28 November. In the following years, Soviet historiography described the incident as Finnish provocation. Doubt on the official Soviet version was cast only in the late 1980s, during the policy of glasnost. The issue has continued to divide Russian historiography even after the end of the Soviet Union in 1991.

Soviet intentions: In 2013, Russian President Vladimir Putin stated at a meeting with military historians that the Soviets had launched the Winter War to "correct mistakes" made in determining the border with Finland after 1917. Opinion on the scale of the initial Soviet invasion decision is divided. The puppet Finnish communist government and the Molotov–Ribbentrop Pact's secret protocol is used as proof that the Soviet Union had intended to conquer all of Finland.
On 1 December 1939, the Soviet Union formed a puppet government, named the Finnish Democratic Republic, to govern Finland after Soviet conquest. A declaration delivered via TASS stated:

The People's Government in its present composition regards itself as a provisional government. Immediately upon arrival in Helsinki, capital of the country, it will be reorganised and its composition enlarged by the inclusion of representatives of the various parties and groups participating in the people's front of toilers.
Soviet leaflets dropped over Helsinki on the first day of the war stated: "Finnish Comrades! We come to you not as conquerors, but as liberators of the Finnish people from the oppression of the capitalists and the landlords".
In 1939, Soviet military leadership had formulated a realistic and comprehensive plan for the occupation of Finland. However, Joseph Stalin was not pleased with the conservative pace that the operation required and demanded new plans be drawn up. With the new plans, the key deadline for Finland's capitulation was to be Stalin's 60th birthday on 21 December. Convinced of the invasion's forthcoming success, Andrei Zhdanov, chairman of the highest legislative body in the Soviet Union, commissioned a celebratory piece of music from Dmitri Shostakovich, Suite on Finnish Themes, intended to be performed as the marching bands of the Red Army paraded through Helsinki.
Hungarian historian István Ravasz wrote that the Soviet Central Committee had set out in 1939 that the former borders of the Tsarist Empire were to be restored, including Finland. American political scientist Dan Reiter stated that the Soviets "sought to impose a regime change" and thus "achieve absolute victory". He quoted Molotov, who had commented in November 1939 on the regime change plan to a Soviet ambassador that the new government "will not be Soviet, but one of a democratic republic. Nobody is going to set up Soviets over there, but we hope it will be a government we can come to terms with as to ensure the security of Leningrad". According to Russian historian Yuri Kilin, the Soviet terms encompassed the strongest fortified approaches of the Finnish defences for a reason. He claimed that Stalin had little hope for such a deal but would play for time for the ongoing mobilisation. He stated the objective as being to secure Finland from being used as a staging ground by means of regime change.
Others argue against the idea of a complete Soviet conquest. American historian William R. Trotter asserted that Stalin's objective was to secure Leningrad's flank from a possible German invasion through Finland. He stated that "the strongest argument" against a Soviet intention of full conquest is that it did not happen in either 1939 or during the Continuation War in 1944 even though Stalin "could have done so with comparative ease". Bradley Lightbody wrote that the "entire Soviet aim had been to make the Soviet border more secure". In 2002, Russian historian A. Chubaryan stated that no documents had been found in Russian archives that support a Soviet plan to annex Finland. Rather, the objective was to gain Finnish territory and to reinforce Soviet influence in the region.