Fresh fighting erupts around Donetsk
Dozens of people were reportedly killed or injured around the separatist-held city of Donetsk on Wednesday, in one of the bloodiest battles between Ukrainian forces and Russia-backed militias since a fragile ceasefire began in February.
A massive bombardment from tanks and artillery was launched at about 3am on government positions near Maryinka, a suburb of Donetsk, and Krasnohorivka, about 10km west of the largest city in Ukraine's breakaway east, according to Andriy Lysenko, a Ukrainian army spokesman. "The enemy is trying to advance. Ukrainian forces are holding off all the attacks," he said.
However, separatist officials blamed Ukraine, claiming government forces had shelled the city.
"Some 15 people have been killed," Vladimir Kononov, defence minister for the self-declared Donetsk People's Republic, told the local DAN news agency. About 60 civilians had been injured, some seriously, DAN reported, citing a separatist doctor.
The artillery and gunfire clashes knocked out power in the region, trapping hundreds of coalminers temporarily underground, separatist officials added.
Dmitry Peskov, a Kremlin spokesman, said Russia was "deeply concerned with the provocative actions by the Ukrainian armed forces that are, as far as we can see, provoking the situation".
Marie Harf, a state department spokeswoman, said that the attack had been launched by "combined Russian separatist forces" against Ukrainian government positions.
"Russia bears direct responsibility for preventing these attacks and implementing a ceasefire. Any attempts to seize additional Ukrainian territory will
Read MoreRussia faked MH17 images: Report
In a rare public appearance in Moscow, Igor Girkin, the rebels' former military commander, said the region was witnessing a level of fighting not seen since the start of the year — saying there had also been a surge in fighting around the towns of Horlivka and Debaltseve.
The scale of the violence spooked investors, with the Russian stock market falling more than 2.5 per cent and the rouble losing 2 per cent against the US dollar.
The upsurge in violence came as the EU begins deliberations on extending its Ukraine-related sanctions against Russia, which expire in July.
Senior officials are increasingly confident that the full range of sanctions will be extended into January 2016, allowing time for a review of the implementation of the Minsk ceasefire agreement.
Such a decision would be a blow to Moscow, which was banking on France, Italy and Spain leading calls for the measures to at least be eased in some areas to reflect a calmer situation in Ukraine.
The issue is expected to be raised at this weekend's meeting of the G7 group of leading nations in Munich.
With differences now narrowed between member states, some EU diplomats believe a final decision could now be taken without EU leaders even debating the matter at the summit in late June.
Russia has in recent weeks been attempting to publicly distance itself from the fighting in Ukraine and restore diplomatic ties with the US, leading to accusations from hardline Russian nationalists that the Kremlin has not done enough to aid the separatists.
Mr Girkin, who goes by the nom de guerre "Strelkov", has been one of the most outspoken critics of Russia's policies in Ukraine, and its decision not to engage in open warfare in the region.
Read MoreWhy corruption inUkraine 'must be destroyed'
"We have completely non-transparent politics in Russia . . . We do not know what the president actually wants," Mr Girkin told a panel discussion in Moscow. "We [Russia] are conducting special operations there [in Ukraine] but everything is a big secret."
He continued: "At 2am this morning I was woken up by someone who said there was shooting in Gorlovka . . . But on television I saw nothing about this . . . [Russian] mass media organisations have been ignoring this recent fighting. From this, we can assume that Russia is continuing its policy of burying its head in the sand."
The former military commander also warned that Transnistria, the Moldovan breakaway republic, was likely to emerge as a new flashpoint in Moscow's conflict with the west, alleging that Mikheil Saakashvili, a former Georgian president, had been appointed governor of Odessa to ratchet up tensions with the pro-Russian Transnistria.
"We are basically in a state of war right now," Mr Girkin said.