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Moscow and Kiev representatives will meet in Minsk Monday after Russian President Vladimir Putin raised the stakes in the Ukraine conflict by calling for statehood to be discussed for the restive east of the former Soviet state.
Putin's remarks on Sunday came just hours after the European Union gave Moscow -- which the bloc accuses of direct involvement in the Ukraine insurgency -- a week to change course or face new sanctions.
"We need to immediately begin substantive talks... on questions of the political organisation of society and statehood in southeastern Ukraine," the Russian leader was quoted by Russian news agencies as saying.
Moscow has previously only called for "federalisation" that would grant greater rights to the eastern regions of Ukraine, where predominantly Russian-speakers live.
But Putin had sparked speculation that he may be seeking to create a pro-Russian statelet when he began to employ the loaded tsarist-era term "Novorossiya", or New Russia, to refer to several regions in southeast Ukraine.
His spokesman Dmitry Peskov said Sunday that Putin was not talking about "Novorossiya's" independence from Ukraine, but rather "inclusive talks".
"Only Ukraine can agree with Novorossiya," he was quoted as saying.
Kiev has warned that it was on the brink of "full-scale war" with Moscow over the crisis in its east, which Europe fears would put the whole continent at risk of conflict.
The EU agreed to take "further significant steps" if Moscow did not rein in its support for the rebels, with new sanctions to be drawn up within a week.
'Terrorists and Russian soldiers'
Kiev said the invigorated rebel push of the past days has included substantial numbers of Russian regular army contingents, which are now concentrating their forces in major towns.
"Terrorists and Russian soldiers continue to concentrate personnel and equipment in regional centres," said security spokesman Andriy Lysenko.
Representatives of Kiev, Moscow and the OSCE were due to meet in Minsk, the capital of Belarus which borders both countries, on Monday under the so-called Contact Group on Ukraine.
It was unclear whether Ukrainian separatists would take part.
Russia has insisted repeatedly that Kiev must speak with rebels holding parts of east Ukraine if the conflict is to be resolved.
Kiev, however, has been reluctant to sit down at the table with the separatists, especially when many of their leaders are Russian.
A Kremlin statement said that Putin and his Belarussian counterpart Alexander Lukashenko "emphasised the importance of organising" the meeting gathering representatives of "the Kiev authorities, the southeastern regions, the OSCE and Russia" during a phone call.
NATO will hold talks in Britain from Thursday at which the Ukraine crisis is expected to top the agenda.
The alliance last week accused Moscow of sending at least 1,000 troops across the border to fight alongside the rebels, along with artillery, tanks and armoured vehicles.
'Practically a state of war'
Moscow denies direct involvement in the conflict, but there have been media reports of secret military funerals for those sent to fight in Ukraine.
Russia admitted that Russian paratroopers had been captured in Ukraine, but alleged they crossed the border by accident.
Soviet-made T-64 assault tanks seen by AFP near Starobesheve, a town about 30 kilometres southeast of Donetsk seized by the rebels, had only one number to mark them out, at the back, while fighters wore unmarked fatigues.
One pro-Russia rebel perched on the side of a tank, however, was decisive that they were not taken from the Ukrainians.
"No, they are ours," he told AFP, before being hushed by his comrade, who added quickly: "Yes, we took them from the Ukrainians."
Lithuania's President Dalia Grybauskaite, whose Baltic nation is wary of the resurgent power on its eastern border, warned that "Russia is practically in a state of war against Europe" and called for EU military assistance to Kiev.
US President Barack Obama will visit Baltic nation Estonia on Wednesday with a simple message for Putin, do not mess with NATO's ex-Soviet members.
More than 2,600 people have died in the Ukraine conflict since mid-April.
Last city standing
Rebels have pushed a lightning offensive around Ukraine's Azov Sea in the past week, prompting speculation of a possible attempt by Moscow to establish a corridor between Russia and the Crimean peninsula it annexed in March.
Ukraine's border guard service said its two ships were fired upon off the Azov Sea coast close to the city of Mariupol, though could not confirm reports that the attack came from Russian air force.
Mariupol "is the last big town in the region under Ukrainian control, home to half a million people," commander of Ukraine's Azov battalion, Andriy Biletskiy told AFP.
Inside the strategic port, volunteer battalions were bracing for a desperate defence of the city, manning barricades of barbed wire and trenches.
Alexander Zakharchenko, prime minister of the self-proclaimed Donetsk People's Republic, spoke to Russian media Saturday about "preparing a second large-scale offensive".