Kiev claims rebel defeats in east Ukraine as Obama warns Russia

Ukrainian special forces take position in the eastern Ukrainian city of Slavyansk. (AFP/Kirill Kudryavtsev)

SLAVYANSK: Ukraine's military launched assaults to retake rebel-held eastern towns on Thursday in which up to five people were reported killed, a move Russian President Vladimir Putin warned would have "consequences".

The offensive sent international tensions soaring and oil prices up, raising the prospect of Russia making good on its threat of a massive response in the ex-Soviet republic.

In Slavyansk, a flashpoint east Ukrainian town held by rebels since mid-April, armoured military vehicles drove past an abandoned roadblock in flames to take up position, AFP reporters saw.

Shots were heard as a helicopter flew overhead, and the pro-Kremlin rebels ordered all civilians out of the town hall to take up defensive positions inside.

"During the clashes, up to five terrorists were eliminated," and three checkpoints destroyed, the interior ministry said in a statement. Regional medical authorities confirmed one death and one person wounded.

Earlier on Thursday, Ukrainian special forces seized back control of the town hall in the southeastern port city of Mariupol with no casualties, Interior Minister Arsen Avakov said. Separatist sources confirmed the loss of the building in the port city, whose population is 500,000.

An army base in the eastern town of Artemivsk overnight also repelled an attack by heavily-armed rebels using machine-guns and grenades, the interior and defence ministries said. One soldier was wounded.

It was the worst violence to erupt in Ukraine since the signing of an international accord in Geneva a week ago which was meant to de-escalate the crisis.

Putin called the armed operation a crime.

"If Kiev has really begun to use the army against the country's population... that is a very serious crime against its own people," he said, calling Kiev's authorities a "junta".

He warned of "consequences, including for our intergovernmental relations".

Russia, which has an estimated 40,000 troops massed on Ukraine's border, has already threatened to respond like it did when it invaded Georgia in 2008 if it sees its interests in Ukraine attacked.

The rebels, which the Kiev government and its Western backers believe are controlled and supported by Moscow, have been occupying around 10 towns in Ukraine's east.

After they dismissed the Geneva agreement, a truce collapsed at the weekend, prompting Ukraine's acting President Oleksandr Turchynov to order a resumption of an "anti-terrorist" offensive to flush the militants out.

US President Barack Obama on Thursday accused Russia of not abiding by the Geneva deal and warned more sanctions could be imposed on Moscow within days.

"We continue to see malicious, armed men taking over buildings, harassing folks who are disagreeing with them, destabilising the region and we haven't seen Russia step out and discouraging it," he said Thursday during a trip to Japan.

Russia, though, claims Washington and the Ukrainian government are reneging on their responsibilities, despite Kiev vowing to give an amnesty to the rebels, protect the Russian language and decentralise power.

While Obama has ruled out sending US or NATO forces into Ukraine, Washington has begun deploying 600 US troops to boost NATO's defences in nearby eastern European states.

France said it was also sending four fighter jets to NATO air patrols over the Baltics.

Russian Foreign Minister Sergei Lavrov on Thursday accused the United States and the European Union of trying to stage "an operation to unconstitutionally change the regime".

"They are trying to use Ukraine as a pawn in a geopolitical game," he said.

The Ukrainian government announced its renewed offensive against the rebels following the discovery in a river near Slavyansk of a weighted down body of an abducted local politician who belonged to Turchynov's party.

On Thursday, a funeral was held for the dead man, Volodymyr Rybak, in his home town of Horlivka. His wife and friends wept before his body, which was covered in flowers, before prayers were said and it was taken for burial.

Ukraine's acting president said he had been "brutally tortured" and blamed the rebels, while his wife said he had been stabbed multiple times.

There were fears the violence on the ground in Ukraine could spiral into a bigger conflict.

Russia, which has an estimated 40,000 troops massed on Ukraine's eastern border, has said it could respond as in 2008, when it invaded Georgia with tanks to support pro-Russian regions seeking independence.

Russia's gas supplies to Ukraine -- and through it, to Europe -- have also become a significant source of tensions.

Putin has warned in a letter to the EU that Moscow could cut gas supplies in a month's time if Ukraine's bill -- now estimated at some $3.5 billion (2.5 billion euros) -- was not paid in full.

The energy concerns sent global oil prices up. The price of North Sea Brent oil rose seven US cents from Wednesday to $109.18 a barrel, and benchmark West Texas WTI oil rose 24 cents to $101.68.

In Asian trade, Texas crude jumped 24 cents to $101.68 a barrel while Brent North Sea oil rose 19 cents to $109.30.