Several hundred rebels seized Popasnaya, a city of 20,000 people, news service Interfax reported, citing the separatists.
After the militants shifted thousands of fighters to the provincial capital of Donetsk last week, Ukrainian forces continued to press their campaign, according to Ukrainian Deputy Foreign Minister Danylo Lubkivsky, who said the separatists wouldn’t agree to peace talks.
“The turmoil in Ukraine is slowly coming to its logical conclusion,” Lubkivsky said in Kiev.
“An active anti-terrorist operation is continuing because they don’t want to lay down their arms.”
Russia will respond to any sectoral sanctions with “serious countermeasures,” Deputy Finance Minister Sergey Storchak said today.
The 28 EU governments yesterday agreed that penalties may be imposed as soon as tomorrow on more Russians they accuse of backing the rebels.
President Vladimir Putin’s government is calling for peace talks amid Russia’s biggest showdown with the U.S. and its European allies since the fall of the Berlin Wall.
About 50 people have been killed, mostly civilians, in Kramatorsk in the northern part of the Donetsk region, which government forces recaptured over the weekend, according to the city’s website.
More than 140 people have been injured in the clashes, with 22 still in the hospital.
Pro-Russian militias attacked Ukrainian positions a dozen times in the past 24 hours, including a tank assault on the Luhansk airport, Defense Ministry spokesman Andriy Lysenko said.
They’ve destroyed seven bridges, including three yesterday, after the army recaptured territory, the government said on its website.
The insurgents also laid mines, posing a risk to civilians, the Defense Ministry said in a statement. Ukraine’s army has won the biggest victories of its three-month campaign during the past few days, retaking the towns of Slovyansk and Kramatorsk.
Lysenko said government troops had blocked all roads to Donetsk and Luhansk.
Several thousand militants and dozens of vehicles including tanks and armored personnel carriers moved to the bigger cities on July 5.
They’ve vowed to make a stand there.
Citizens in Donetsk report daily gunfire and explosions, while Ukrainian army forces have yet to enter the cities in force.
Two people died and eight were wounded by shelling in Luhansk, according to Lysenko, who said the militants had fired the round.
Any decision by the EU on sanctions this week will build on the asset freezes and travel bans the bloc has already imposed on 61 people.
Its first opportunity to consider wider penalties on Russian industry, investment or trade will be at a July 16 summit.
Objections by countries such as Italy, Austria, Slovakia, France and Greece have frustrated moves toward broader sanctions, which require unanimity.
Also yesterday, U.S. President Barack Obama spoke by telephone with President Francois Hollande of France about Ukraine.
The leaders agreed that their preference is for a cease-fire and that Russia has a responsibility to halt all support for rebels, according to a White House statement.
The presidents concluded that the U.S. and Europe should take “coordinated measures to impose costs on Russia” if the country doesn’t take steps to ease the crisis.
In Moscow, Russia’s Micex stock index added 0.2 percent to a nine-month high at 6 p.m. as investors bet Russia wouldn’t intervene in the conflict.
OAO Gazprom, the nation’s biggest gas producer, and oil producer OAO Lukoil each gained 0.5 percent.
Ukraine’s hryvnia climbed 0.4 percent against the dollar.
It’s lost 31 percent this year, the worst performer among more than 170 currencies tracked by Bloomberg.
The Ukrainian government said it will need to spend an estimated 50 million hryvnia ($4.3 million) to repair the bridges destroyed by the rebels, whom it blamed for 230 million hryvnia ($20 million) more in damage to the country’s railroads.
Pictures following one blast in Novobakhmutova, about 30 kilometers (20 miles) north of central Donetsk, yesterday showed a rail bridge collapsed across a main highway leading north to Slavyansk, leaving part of a freight train suspended on the track in mid-air on the electrified line.
In Brussels, Ukrainian Deputy Prime Minister Volodymyr Hroisman said a $17 billion loan from the International Monetary Fund had helped Ukraine’s recovery but the country still needed more aid.
“The Ukrainian people have definitively chosen the European path and the European family, but the price we are paying for this is very high,” Hroisman said.
“We have unprecedented aggression by the Russian Federation, not only on a military level.”
The Russian government urged the EU to condemn “criminal policies of the Kiev authorities” and accused the Ukrainian government of ignoring calls to protect civilian lives.
“Our position is that there can be no reason whatsoever to postpone the cease-fire,” Russian Foreign Minister Sergei Lavrov told a news conference in Sofia.
“The fighting is inflicting great suffering on the civilian population, as a result of which the outflow of refugees is increasing and civilian infrastructure is being destroyed.”