Pro-Russian rebels have retaken the strategic town of IIovaisk after Ukrainian troops withdrew following days of fierce fighting.
The past week has seen Ukrainian forces flee in the path of a new rebel advance which the West claims has been aided by columns of Russian troops.
Meanwhile a Ukraine contact group is to meet in the Belarussian capital Minsk today.
Russian President Vladimir Putin has called for the talks to consider the issue of statehood of eastern Ukraine, although a spokesman said this did not mean Moscow now endorses rebel calls for independence.
“There should be substantive, meaningful talks, concerning not only technical issues but also related to the issues of the society’s political organisation and statehood in southeastern Ukraine. These talks should begin immediately in order to protect legitimate interests of people living there,” said Putin.
In a rare gesture to ease the tension Ukraine has handed over a group of captured Russian paratroops and Russia has returned 63 Ukrainian soldiers who had crossed into its territory last week.
Despite the evidence, Moscow denies its troops are fighting in Ukraine.