Putin unveils Ukraine peace plan ahead of NATO summit

 Russian President Vladimir Putin on Wednesday unveiled a peace plan for Ukraine that could be agreed by the weekend to end a devastating conflict that has all but severed East-West ties, AFP reports.

The surprise move could take the wind out of the sails of a high-stakes NATO summit on Thursday where Western leaders led by US President Barack Obama plan to step up their defence of eastern Europe in the face of Russian "aggression".

Putin appealed for both sides to lay down their weapons after nearly five months of fighting that has killed 2,600 people and been blamed by both Kiev and its Western allies on Putin's attempts to seize back former Soviet and tsarist lands.

The sudden glimmer of hope for an imminent end to Europe's worst crisis in at least two decades saw stocks in key markets rise and the Russian ruble rebound.

But there were signs that the truce deal -- which Ukrainian President Petro Poroshenko said was agreed during telephone talks with Putin -- lacked universal support.

Ukrainian Prime Minister Arseniy Yatsenyuk said Putin's announcement was meant to "pull the wool over the eyes of the international community ahead of the NATO summit and an attempt to avert the EU's inevitable decision to unleash a new wave of sanctions against Russia".

Obama, on a highly symbolic visit to former Soviet republic and new NATO member Estonia, said it was "too early to early to tell" if the ceasefire deal would hold on the ground.

While the fierce fighting of recent days appeared to have eased, the booms of combat could be heard around the eastern rebel stronghold Donetsk that Ukrainian troops had surrounded before being pushed back by the resurgent militias in recent days.

  'Unmistakable support' for Ukraine 

Putin's message seemed partially calculated at taking the sting out of the NATO meeting opening in Wales on Thursday where Western leaders are due to address a wave of reports that Russia was secretly shuttling troops and heavy weapons into eastern Ukraine to help the pro-Kremlin separatists.

The 28-nation alliance plans to unveil a new rapid response force for eastern Europe that Moscow has branded a direct national security threat.

Obama said NATO must send an "unmistakable message of support" to Ukraine, which has been in turmoil since the February ouster of a Kremlin-backed president by pro-Western protesters.

Ukraine will also host US-led military drills September 13-26 aimed at showing the Kremlin the degree to which Kiev is determined to break its dependence on its former Soviet masters in Moscow.

The Kremlin denies giving anything more than moral support to the insurgents who launched their uprising against Kiev's new Western-backed leaders in April.

But Western powers say Moscow has been orchestrating the insurrection as part of a land grab that started with its annexation of Ukraine's strategic Crimea peninsula in March.

  Seven-point blueprint 

Poroshenko said the seven-point blueprint was agreed during a phone exchange between the two leaders that appeared to underscore Putin's influence in a conflict in which he denies playing any role.

The first point announced by Putin demands an end to "active offensive operations by the (Ukrainian) armed forces and armed rebel units in the southeast of Ukraine".

It also invites international monitors to watch over parts of the border controlled by insurgents and allegedly used to smuggle in Russian weapons and -- more recently -- highly-trained paramilitary troops.

Putin said he expected a final agreement to be announced by the insurgents and Kiev representatives during European-mediated negotiations on Friday in the Belarussian capital Minsk.

But there were doubts about whether the loose band of rebel commanders who have been routing Ukraine's army in recent fighting were willing to either disarm or disband.

One separatist leader in Donetsk said militias would halt fire only if government forces retreat from eastern cities they had been shelling in recent weeks.

  87 Ukrainian bodies 

Western leaders have learned to their chagrin that they have few actual options in helping Ukraine.

Obama has ruled out direct military intervention and economic sanctions imposed on Russia have yet to show any sign of changing the Kremlin's hawkish ways despite hitting the economy hard.

Diplomatic sources said European nations are now discussing a British-backed plan to boycott Putin's showpiece 2018 football World Cup.

Poroshenko had insisted since his May election that he could crush the rebellion and reunify his fragmented country.

But his negotiating position with both Russia and the insurgents was weakened dramatically in recent days by a new rebel counter-offensive apparently backed by Russian troops.

Government forces have in some cases simply abandoned their equipment as they cede swaths of territory that they had initially won back from the militants.

Officials revealed on Wednesday that 87 bodies of soldiers had been registered in morgues from recent fighting in the key eastern transport hub of Ilovaysk, a key flashpoint in the new battlefront.