Ukraine crisis: Putin, Poroshenko working on ceasefire

Russia and Ukraine said Wednesday they are working on a deal to halt months of fighting in eastern Ukraine, an announcement that threatened to upstage a crucial NATO summit on the crisis that has chilled East-West relations.

Western leaders expressed some skepticism over the plan, noting it wasn't the first attempt to establish a truce, and that earlier efforts had failed.

Ukrainian President Petro Poroshenko's office said after a telephone conversation with Russian President Vladimir Putin that the two leaders have agreed on steps for a cease-fire.

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In a televised statement, Putin spelled out a seven-point plan for ending hostilities in eastern Ukraine, where Russian-backed separatists scored significant gains last week against government forces after four months of fighting.

Putin, speaking on a visit to Mongolia, said the rebels should halt their offensive and the Ukrainian government forces should pull back to a distance that would make it impossible for them to use artillery and rockets against residential areas. He also urged international monitoring of a cease-fire, a prisoners exchange and the delivery of humanitarian aid to war-ravaged regions.

Poroshenko also voiced hope that Friday's talks in the Belarusian capital of Minsk would allow both sides to "take real steps to achieve peace."

He discussed the plan with German Chancellor Angela Merkel, saying it should include the OSCE monitoring of a cease-fire, the withdrawal of foreign troops, a buffer zone on the border and the release of all Ukrainian prisoners held in Russia, according to his office.

The Ukrainian leader met with Putin in Minsk last week, but they didn't announce any agreement after that session.

Ukrainian officials said the bodies of 87 soldiers had been retrieved from the area near the city of Ilovaysk, the scene of a horrific government defeat over the weekend. Ukraine and the West said the rebel offensive was spearheaded by regular Russian army units, an allegation Moscow has rejected

NATO leaders gather

President Barack Obama on Wednesday dismissed the Kremlin denials, saying that "Russian combat forces with Russian weapons in Russian tanks" were in eastern Ukraine.

Obama, on a trip to Estonia to reassure allies along Russia's border, said it was too early to say if the announced truce could hold, noting that "we haven't seen a lot of follow-up on so-called announced cease-fires."

Foreign Minister Frank-Walter Steinmeier of Germany, which has been pushing hard for a cease-fire, also was skeptical.

"What we have experienced today is, unfortunately, a bit of a repeat of the Minsk meeting there seem to be preliminary agreements, and then things come apart again," Steinmeier said in Hamburg. "It may be a small sign of hope, but whether it is good news will only become clear in the coming days."

Poroshenko announced a unilateral cease-fire in June, but it failed to stop the fighting, with Ukraine and the separatists blaming each other for violating it.

Obama left Estonia for Wales, where he and other Western leaders will attend a NATO summit that starts Thursday. The alliance is expected to approve plans to station more troops and equipment in Eastern Europe, with the aim of building a rapid response force that could deploy within 48 hours

Steinmeier hinted at some discord within NATO over Ukraine, saying: "I found that some things that came out of Brussels, from NATO headquarters, in these last few weeks weren't always helpful." But he added that it is Russia, not the alliance, that is responsible for the crisis in Ukraine.

At the same time, the European Union was preparing a new set of economic sanctions against Russia over its actions in Ukraine. EU leaders said over the weekend that the new punishment can be enacted in a week, but Putin now may hope to dodge the blow with the cease-fire deal.

Obama will join a meeting at the summit Thursday with Germany, France, Britain, Italy and Ukraine. The prime minister's office confirmed Wednesday that Canada is not in on that meeting, but said Prime Minister Stephen Harper has spoken with Obama "as recently as over the weekend" and will have the opportunity to do so again "on the margins of the summit."

'Victory for Russia'

Miroslav Rudenko, one of the rebel leaders, welcomed a cease-fire plan in remarks carried by the Interfax news agency, saying "there'll be no sense in a military solution to the conflict" if Kiev withdraws its troops.

Putin's demand for Ukrainian forces to pull out from the vicinity of populated areas in the east could be something that has already happened under the brunt of the latest rebel offensive.

Dmitry Trenin, director of the Carnegie Moscow Center, said a truce would be a victory for Putin.

"A cease-fire, in my view, is an important victory for Russia," Trenin told reporters. "And having secured a cease-fire, if it actually goes through, Russia will be bargaining from a position of strength, using the domestic political situation in Ukraine, the economic plight of the country, the social consequences from that plight."

Col. Andriy Lysenko, a spokesman for Ukraine's National Security Council, said the situation in the east is "not simple, but we see a reduction of military activity, a reduction of the use of artillery and other heavy weaponry." He did not give specifics.

Daunting challenge

Even if the cease-fire holds, negotiating a lasting peace in the east will be a daunting challenge in the conflict, which the U.N. estimates has has killed nearly 2,600 people and forced over 340,000 to flee their homes.

Rebels have dropped a demand for full independence, saying they are ready to discuss staying inside Ukraine in exchange for a broad autonomy for mostly Russian-speaking regions in the east a stance that reflects Putin's desire to maintain leverage over its neighbor and prevent it from ever joining NATO.

Poroshenko has promised to grant more powers to the provinces, but he has yet to spell out his proposal, and it remains unclear if Russia sees it as sufficient. The Ukrainian leader's attempt to negotiate a compromise with the rebels could put him under fire at home, where many would see it as kowtowing to Moscow.

The peace plan already met stiff resistance from Ukrainian Prime MinisterArseniyYatsenyuk, who described it as amaneuverby Putin to avoid new Western sanctions criticism that appeared to reflect divisions in the Ukrainian leadership.

Stock markets jumped on first reports of a possible cease-fire deal but later eased back slightly. By early afternoon in Europe, Russia'sMICEXbenchmark was up 2.7 percent, while therublerose 1.4 percent against the U.S. dollar.

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Germany'sDAXindex, which has been particularly sensitive to news on the crisis because of the country's economic ties with Russia, was up 1.2 percent.

Also on Wednesday, officials said France suspended the delivery of a warship to Russia at least until November, following pressure from allies. The Vladivostok, the first of two Mistral-class helicopter carriers ordered by Russia, was due to be delivered next month as part of a 1.2 billion euro ($1.6 billion) contract the biggest-ever sale of NATO weaponry to Moscow.