New volunteers of Ukrainian self-defence battalion "Azov" take their oath of allegiance to their country during a ceremony in Kiev July 16, 2014. REUTERS/Valentyn Ogirenko

By Richard Balmforth

KIEV (Reuters) - Fighting raged in Ukraine's east on Wednesday when separatists tried to break through the lines of government forces near the border with Russia and a tentative step towards agreeing conditions for a ceasefire failed.

Eleven more Ukrainian soldiers were killed in the space of 24 hours while hundreds of bodies of rebels were found in shallow graves in a former separatist stronghold, the army said.

Fighting has escalated sharply since Friday with the downing of a Ukrainian military transport plane and the deaths of civilians in air and artillery attacks on residential areas on both sides of the border, which Russia and Ukraine have blamed on each other.

Accusations of direct Russian involvement in the three and a half month conflict, in which hundreds have died, is being pushed hard by Ukraine to persuade the United States and its European allies to impose tougher sanctions on Russia.

In telephone conversations with German Chancellor Angela Merkel and Herman Van Rompuy, President of the European Council, late on Tuesday, President Petro Poroshenko again set out evidence of fighters crossing into Ukraine from Russia with heavy military equipment, his website said.

Prime Minister Arseny Yatseniuk leveled harsh criticism at Russian President Vladimir Putin.

View gallery

A woman embraces her son, a new volunteer of Ukrainian self-defence battalion "Azov", afte …

"Everything which is happening in Ukraine has been planned by Russia since 2004. Putin has a clear plan and that is to destroy Ukraine and establish his influence over post-Soviet space," he said in a public speech carried by his website.

Andriy Lysenko, a spokesman for Ukraine's defense and security council, told journalists that separatists had kept up attacks overnight on government positions along the border.

Government troops had been ambushed by separatists at Izvarino on the border and there had been early morning clashes near the border settlement of Stepanivka when separatists tried to break out of encirclement by the army.

"There was tank and mortar fire and from rockets on positions of the (Ukrainian) 'anti-terrorist operation'," Lysenko said. The number of casalties was being established.

Lysenko renewed charges that Russia was building up its forces near the border.

OVERFLIGHTS RESUME

View gallery

New volunteers of Ukrainian self-defence battalion "Azov" take their oath of allegiance to …

But he said, after being temporarily grounded on Tuesday after the downing of an An-26 transporter, Ukrainian warplanes had been given the go-ahead to resume flights over the east.

"They...are already supporting our ground forces in those regions where the toughest clashes are going on," he said.

The new casualty figures would appear to bring to nearly 270 the number of Ukrainian servicemen killed since the government launched an "anti-terrorist" operation in April to crush the rebels. Hundreds of civilians and rebels have also been killed.

Lysenko said that in Slaviansk, a former rebel stronghold re-taken by government forces, "hundreds of bodies of...(rebel) fighters" had been found under a light covering of earth.

"Some of these graves have been mined by the terrorists."

Violence erupted in Ukraine's Russian-speaking east in April after a pro-Europe revolt in Kiev that ousted a Moscow-backed president and led to Russia's annexation of Crimea, causing the biggest Russia-West crisis since the Cold War.

View gallery

People attend a rally demanding support for the Ukrainian army in the military operation against sep …

A 'contact group' of officials from Ukraine, Russia and the Organization for Security and Co-operation in Europe (OSCE) said it tried on Tuesday to re-activate peace talks - but a planned video link-up with separatists never materialised.

"In the opinion of the contact group, this indicates a lack of willingness on the side of separatists to engage in substantive talks on a mutually agreed ceasefire," it said in a statement. It urged separatists to return to talks immediately.

Ukraine has accused Russia repeatedly of turning a blind eye to Russian fighters crossing the long, shared border to team up with rebels, often with Russian weapons and military equipment. Moscow denies this.

In an increasing war of words and mutual recrimination, Moscow accused Ukrainian forces of firing a shell across the border last Sunday, killing a Russian man in a Russian border town. Kiev denies its forces were to blame and says the shell was the work of rebels out to discredit government forces.

Eleven people were said by local health authorities to have been killed in an air strike at the Ukrainian town of Snizhne, 20 km (12 miles) from the border.

Kiev denied rebel charges that the strike had been carried out by a Ukrainian warplane and said it was the work of an "unknown" plane - apparently an accusation against Russia, since the rebels have not used aircraft in the conflict.

Kiev has also said that a missile that brought down the An-26 military transporter was probably fired from Russian territory. Kiev says it has found four survivors from the eight people who were on board, that two others are being held by rebels, and that it does not know the fate of the remaining two.

Since losing Slaviansk, rebels has been pushed back to the main industrial city of Donetsk though they also remain in control of the border town of Luhansk.

Donetsk, which had a pre-conflict population of about 900,000 people, has been steadily emptying as thousands, fearing a government offensive, have fled.

Once a bustling city, there are fewer and fewer people out on the streets and few cars. Most of the banks, shops and bars have closed, cash-dispensers have been switched off and street traffic lights no longer work.

Lyudmila, 35, who was leaving Donetsk, said: "I have been forced to gather up my things and get away from this lawless, genocide, which is happening. I am simply saving my children. My husband is staying behind. I have left my home and my work. I am leaving to save my children."

(Additional reporting by Natalya Zinets in Kiev and Anton Zverev in Donetsk; editing by Ralph Boulton)

Mass Arrests: UK Police Arrest 660 Suspected Pedophiles

View gallery

Obama Announces Expanded Sanctions Against Russia (ABC News)

The Obama administration is imposing new, deeper sanctions on Russia for its intervention in Ukraine, targeting Russian banks and energy and defense firms.

“Given its continued provocations in Ukraine, today I have approved a new set of sanctions on some of Russia’s largest companies and financial institutions,” President Obama announced during a brief statement in the White House briefing room on Wednesday.

“I’ve repeatedly made it clear that Russia must halt the flow of weapons and fighters across the border into Ukraine, that Russia must urge separatists to release their hostages and support a ceasefire, that Russia needs to pursue internationally mediate talks and agree to meaningful monitors on the border -- I’ve made this clear directly to Mr. Putin,” he added. “So far, Russia has failed to take any of the steps that I mentioned.”

Obama: US ‘Prepared To Respond’ To Russian Aggression In UkraineUkraine Crisis Tests Obama and Putin’s Already Rocky Relationship

Obama Raises Doubts Over Russia De-escalation Intents in Ukraine

“These sanctions are significant but they are also targeted, designed to have the maximum effect on Russia while limiting any spillover effects on American companies,” the president said. “The Russian leadership will see once again that its action has consequences.”

The U.S. Department of the Treasury today imposed what it called “a broad-based package of sanctions on entities in the financial services, energy, and arms or related materiel sectors of Russia, and on those undermining Ukraine’s sovereignty or misappropriating Ukrainian property.”

Among the firms targeted is Kalashnikov Concern, the company that makes AK-47s.

“Russia has continued to destabilize Ukraine and provide support for the separatists, despite its statements to the contrary,” Under Secretary for Terrorism and Financial Intelligence David S. Cohen said in a statement. “Because Russia has failed to meet the basic standards of international conduct, we are acting today to open Russia’s financial services and energy sectors to sanctions and limit the access of two key Russian banks and two key energy firms to U.S. sources of financing, and to impose blocking sanctions against eight arms firms and a set of senior Russian officials.”

View Gallery

U.S. imposes toughest sanctions yet on Russia

Those affected by the action include financial institutions, energy firms, and defense companies.
Obama's explanation

China moves oil rig out of waters Vietnam claims

Reuters Videos

Chinese oil rig move away from disputed waters

Watch video

HANOI, Vietnam (AP) — China on Wednesday moved an oil rig out of waters claimed by Hanoi after two months of drilling that triggered a near-breakdown in ties between the neighbors and led to deadly protests in Vietnam.

Withdrawing the rig from near the Paracel Islands in the South China Sea reduces the immediate risk of a naval standoff but will do little to mend relations between the two countries. Beijing made it clear it was shifting the billion-dollar rig because it had completed its work, not because of the criticism of its actions.

Vietnam demanded that China never deploy a rig again in waters it claims in the region.

"Vietnam is determined to defend its sovereignty and sovereign rights in accordance with international law," the foreign ministry said in a statement.

China deployed the rig in early May, then Hanoi demanded Beijing withdraw it and sent patrol ships to try and disrupt the operations. China insisted it had done nothing wrong and accused Vietnam of illegally disrupting its activities.

The United States, which has criticized China for deploying the rig, welcomed China's announcement. State Department spokeswoman Jen Psaki said the incident had highlighted the need for claimants to clarify their claims in accordance with international law and reach a shared understanding on appropriate behavior in disputed areas.

View gallery

In this May 7, 2012 file photo released by China's Xinhua News Agency, Haiyang Shiyou oil rig 981, t …

The deployment of the rig was widely seen as part of a strategy by China of gradually staking out its claims in the South China Sea, all or part of which are also claimed Vietnam, the Philippines, Taiwan, Malaysia and Brunei.

China's Foreign Ministry said the rig was withdrawn because the typhoon season was beginning and the work had been completed.

It said it discovered oil and gas in its explorations but was assessing the data before deciding its next move. Whether Beijing deployed the rig for genuine exploration reasons or geopolitical ones was never clear. When it announced the deployment, Beijing said it would withdraw the rig on Aug. 15, also citing the typhoon season.

Ha Le, deputy director of Vietnam's fisheries resources surveillance department, said China began removing the rig and escorting vessels Tuesday night, and by 8 a.m. Wednesday it was 40 nautical miles northwest of its original location and continuing to move toward China's Hainan island.

Le said 30 vessels from Vietnam's coast guard and fisheries patrol forces that were sent to try to force the Chinese oil rig away will return to port to avoid Typhoon Rammasun, which is on a path into the South China Sea.

China's unwillingness to move the rig exposed Vietnam's lack of options when dealing with its giant neighbor. The workings of the government here are shrouded in secrecy, but it has long been assumed that the Communist Party is split between a faction that favors a tough line against Beijing — and consequentially stronger ties with the United States and U.S. allies — and other members who believe a quiet compromise can be reached with their ideological allies in China.

As a result of the rig placement, Prime Minister Nguyen Tan Dung has said the country was preparing to file a legal challenge to China's claims in an international tribunal, which could anger China. It remains to be seen whether Vietnam will go ahead with that now the rig has been withdrawn.

Former Vietnamese ambassador to Beijing Nguyen Trong Vinh said China's removal of the rig didn't signal a change of attitude on behalf of the country.

"The removal of the oil rig from our continental shelf and exclusive economic zone is only temporary. Maybe they pulled out the oil rig ahead of the typhoon season. It does not mean that they have abandoned their resolve to take control of most of the East Sea," he said, using the Vietnamese term for the South China Sea.

____

Associated Press writer Matthew Pennington in Washington contributed to this report.