Obama warns Russia as OSCE team presented to media

Pro-Russian militants in Ukraine today presented a captured team of international observers as "prisoners of war," raising the stakes in the crisis as US President Barack Obama warned Moscow against "provocation".

The self-styled mayor of rebel-held Slavyansk, which has become the epicentre of the crisis, led eight European members of an OSCE military inspection mission before scores of local and foreign journalists in the town hall.

With four armed rebels watching over him, a spokesman for the group, German officer Axel Schneider, said the team was in good health and stressed they were "OSCE officers with diplomatic status".

"I cannot go home of my own free will," he told reporters, adding that negotiations were under way to free them.

The local rebel leader, Vyacheslav Ponomaryov, earlier told reporters: "In our town, where a war situation is going on, any military personnel who don't have our permission are considered prisoners of war."

Ukraine's foreign minister said the OSCE's head, Lamberto Zannier, was on his way to Kiev to mediate in the crisis but the organisation's Vienna headquarters later denied this.

Pro-Russia militias this month occupied a string of towns and cities in eastern Ukraine, sparking a military response from the Ukrainian army, which is laying siege to Slavyansk.

The detention of the men from the Organisation for Security and Cooperation in Europe has sparked global outrage amid the worst East-West crisis since the end of the Cold War.

AFP reporters in Slavyansk said tensions were running high at checkpoints, while militants were reinforcing their positions in the town and ordering journalists away.

The international community is on edge, with one Western diplomat raising the possibility of an invasion in the coming days by Russia, which has some 40,000 troops massed on the border.

Speaking in Asia, Obama called for global unity as Europe and the US prepare fresh sanctions against Moscow expected to come into force as early as tomorrow.

Obama said Russia had "not lifted a finger" to implement a deal struck in Geneva on April 17 aimed at easing the crisis.

Continued Russian "provocation" would meet with "consequences, and those consequences will continue to grow," he told reporters in Kuala Lumpur. 

Obama urged Russia to call on the militants in eastern Ukraine to leave occupied buildings and "participate with international observers and monitors rather than stand by while they are being bullied and in some cases detained by these thugs".

A second OSCE team was due in Slavyansk to negotiate the release of the captives -- four Germans, a Pole, a Swede, a Dane and a Czech.

Russia has said it will also take steps to secure their freedom but has blamed Kiev for their capture, stressing it was up to the host country to ensure their security.

The rebels have accused the team -- which included five Ukrainians, one of whom was later released -- of being "NATO spies" and said they would only be freed as part of a prisoner swap.

Ponomaryov claimed they were "not our hostages -- they are our guests" and said he had "no direct contact with Moscow".

The rebel mayor said there would be no contact with Kiev over the imprisoned Ukrainians because the pro-Kremlin insurgents see the capital's Western-backed government as illegitimate.

Ukraine's authorities, he said, "understand only the language of force".

Ponomaryov added the rebels were also holding three Ukrainian military officers captured overnight on what he said was a spying mission.

Russian television showed the men blindfolded, cuffed and in their underpants.

As the crisis worsens, the Group of Seven leading economies and the European Union are readying sanctions that could be announced as soon as tomorrow in a bid to raise the pressure on Russian President Vladimir Putin.

The EU said top officials would meet tomorrow to weigh further sanctions. A diplomat in Brussels said a list adding 15 people to the 55 Russians and Ukrainians already blacklisted by the EU had been approved in principle.

The US and EU have already targeted Putin's inner circle with visa and asset freezes and imposed sanctions on a key Russian bank.

Obama stressed the need for a unified response to isolate Russia. It was vital to avoid "falling into the trap of interpreting this as the US is trying to pull Ukraine out of Russia's orbit, circa 1950. Because that's not what this is about," he said.

"We're going to be in a stronger position to deter Mr Putin when he sees that the world is unified and the United States and Europe are unified rather than this is just a US-Russian conflict," Obama added.