Malaysian jet with 295 passengers crashes in Ukraine

 A Malaysian airliner carrying 295 people from Amsterdam to Kuala Lumpur crashed on Thursday in rebel-held east Ukraine, as Kiev said the jet was shot down in a "terrorist" attack, AFP reports.

Ukraine's government and pro-Russian insurgents traded blame for the disaster, with comments attributed to a rebel commander suggesting his men may have downed Malaysia Airlines flight MH17 by mistake, believing it was a Ukrainian army transport plane.

There was no sign of survivors at the crash site near the rebel-held town of Shaktarsk in the Donetsk region, where an AFP reporter saw dozens of severely mutilated corpses strewn through the smouldering wreck of the decimated airliner.

Debris stretched for kilometres in the area near the Russian border, with the jet's tail marked with the Malaysian Airlines insignia laying in a corn field, and insurgent fighters and fire trucks nearby.

Russian news agency Itar-Tass cited a Ukrainian aviation official as saying no one had survived.

Malaysia Airlines announced on Twitter the loss of the Boeing 777, which had been expected in the Malaysian capital at around 6:00 am on Friday (2200 GMT Thursday).

The disaster comes just months after Malaysia's Flight MH370 disappeared on March 8 with 239 on board. The plane diverted from its Kuala Lumpur to Beijing flight path and its fate remains a mystery despite a massive aerial and underwater search.

Malaysia's Prime Minister Najib Razak said on Twitter he was "shocked by reports that an MH plane crashed" and announced an "immediate investigation."

Boeing said it was ready to assist the authorities in any way following the crash.

"All our thoughts and prayers go to the people on board the Malaysia Airlines plane missing in Ukrainian airspace, as well as their families and friends," it said in a statement.

The Kremlin said President Vladimir Putin and US President Barack Obama -- at loggerheads over a new wave of US sanctions over Ukraine -- had discussed the crash.

Obama called it a "terrible tragedy" and said US officials were trying to establish if any Americans were on board.

Four French nationals and several Dutch were confirmed to have been on board the doomed flight.

Europe and US stock markets were sent tumbling by news of the crash, which sharply raised tensions already fuelled by broadened US and EU sanctions.

Airlines in France, Germany and Britain were told to avoid Ukraine's airspace following news of the tragedy.

- Shot by mistake? -

There were conflicting claims of responsibility after the shocking new development in crisis-torn Ukraine where fighting between separatists and the Western-backed government has claimed over 600 lives.

The official spokesman for President Petro Poroshenko said he believed pro-Russian insurgents downed the jet.

"This incident is not a catastrophe. It is a terrorist act," Poroshenko's spokesman posted on Twitter.

The Ukrainian leader said earlier that "the Ukraine Armed Forces did not fire at any targets in the sky" and vowed "those behind this tragedy will be brought to justice".

Pro-Russian rebels in the self-proclaimed Lugansk People's Republic claimed in a statement the airline split in two after being shot down by a Ukrainian jet -- which was then shot down.

"Witnesses watching the flight of the Boeing 777 passenger plane saw it being attacked by a battle plane of the Ukrainian forces," it said.

But a social media site attributed to a rebel commander in Donetsk itself said the insurgents shot down an army transporter at the exact site of the Malaysia Airlines crash.

The comments by Igor Strelkov, top military commander of the self-proclaimed "Donetsk People's Republic" suggest the separatists shot down the Malaysia Airlines plane by mistake, believing it was a large Ukrainian army transport plane.

"We just downed an An-26 near Torez. It is down near the Progress mine," said the VK page attributed to Igor Strelkov, which is frequently quoted by Ukrainian media.

"We had warned (the Ukrainian armed forces) not to fly in 'our sky'," Strelkov says in the post. "And here is a video confirming that a 'bird fell'," said the post.

The website then provides a link identical to that published by Ukrainian media in reports about the Malaysia Airlines jet.

- Ukrainian jet 'downed' -

The crash came with tensions already soaring after Kiev accused Russia of downing a Ukrainian military plane on a mission over the east of the country on Wednesday, the first direct claim of a Russian attack on Ukrainian forces.

The pilot managed to eject and was rescued by Kiev forces, Ukraine's National Security and Defence Council said.

Russia's defence ministry -- which NATO claims has massed some 12,000 troops along Ukraine's porous border -- dismissed the claim as "absurd", news agencies reported.

The dramatic developments on the ground came alongside the already serious fallout from fresh US and EU sanctions slapped on Russia for its perceived support of separatists in the ex-Soviet state.

Moscow condemned the measures as "blackmail" and warned of retaliatory action against Washington, which took a swipe at major players in Russia's finance, military and energy sectors in the sanctions.

In eastern Ukraine fierce fighting between government forces and pro-Moscow rebels has intensified in recent days with some 55 civilians killed since the weekend.

Germany and France have been spearheading a push to revive talks between Kiev and the rebels over a potential ceasefire but attempts to hold a Skype videoconference fell through Tuesday.

Ukrainian forces made a string of major gains after Poroshenko tore up an unsuccessful ceasefire earlier this month, but progress has slowed since rebels retreated into two major regional centres where they have pledged to fight to the end.

By Stephane ORJOLLET with Max DELANY in Kiev