US Threatens Russia with More Sanctions

The United States, on Saturday, warned that it could escalate sanctions on Russia after rebels overran a key Ukrainian town in violation of a truce, leaving a reported 179 government soldiers dead over a month of fighting.

"We're not going to sit there and be part of this kind of extraordinarily craven behaviour at the expense of the sovereignty and integrity of a nation," US Secretary of State John Kerry said in London before talks with British counterpart Philip Hammond.

The US and Britain are considering "additional sanctions, additional efforts" against Russia, Kerry said.

The toll of 179 soldiers' deaths in the month-long battle over Debaltseve was given by Yuri Biryukov, an aide to Ukraine's President Petro Poroshenko, on his Facebook page.

If that figure is confirmed, it would represent one of the bloodiest losses suffered by the Ukrainian side in the 10-month conflict.

But Kiev is officially giving a much lower toll. Defence Minister Stepan Poltorak on Saturday said that the government's tally of troop deaths in Debaltseve for this week was 20.

He added that 112 soldiers had been taken prisoner, while 2,500 had braved rebel fire to flee to safety on Wednesday.

No 'illusions' over truce

The Ukrainian separatists, meanwhile, said they would conduct a prisoner swap of some 40 soldiers they had taken - including some in Debaltseve - on Saturday in their stronghold of Lugansk.

The detained soldiers wore beards and looked tired, and one had his arm bandaged, journalists invited to travel with them in the rebel convoy to Lugansk saw.

There was no immediate confirmation of the prisoner exchange from the Ukrainian side, however, and an AFP reporter in Lugansk said it had not occurred.

If the swap does go ahead, it would be a rare act of compliance with the barely observed truce.

Germany and France, which brokered the truce, said they were determined to see it take hold despite the many violations.

"We don't have any illusions" about the difficulty involved, German Chancellor Angela Merkel said after meeting French President Francois Hollande in Paris on Friday.

But she said she was "even more convinced" a negotiated solution was the only way to end the conflict, which the United Nations estimates has killed 5,700 people since it began in April last year.

Under the truce, both sides were to withdraw their heavy weapons from the frontline by March 3, carry out a prisoner exchange, conduct negotiations on greater autonomy in rebel-held areas, and eventually restore Ukraine's control over all of its border with Russia.

But Kiev and the rebels continue to trade accusations of shelling, mortar rounds and rocket strikes targeting their positions.

Ukrainian defence officials allege that Russia has deployed 20 tanks towards the port city of Mariupol and that a dozen enemy reconnaissance drones controlled from over the border have been shot down.

The rebels claimed to have pulled back weapons in some areas, but there was no confirmation from the Organization for Security and Cooperation in Europe (OSCE), which is monitoring the truce.

They have so far barred the OSCE observers from entering Debaltseve to assess the situation, but promised they would finally be allowed in on Sunday.

Russia undermining 'global order': US

Russia's repeated denials of militarily backing the separatists have been dismissed by the West, which says it has satellite imagery and other confirmation of troop and material movements.

"Russia's continued support of ongoing separatist attacks in violation of the ceasefire in eastern Ukraine is undermining international diplomacy and multilateral institutions - the foundations of our modern global order," US State Department spokeswoman Jen Psaki said.

Moscow is under several rounds of US and EU sanctions over the crisis, but while they have accelerated Russia's slide towards recession they have thus far failed to change President Vladimir Putin's stance.

In one sign of the effects on Russia's economy, rating agency Moody's cut its debt note by one notch into "junk" territory, just a month after its last downgrade.

Meanwhile, Ukraine's former pro-Kremlin president Viktor Yanukovych, whose ouster early last year led to the insurgency raging in east Ukraine, said in a Russian TV interview excerpt released on Saturday: "I'll be back."

The ex-leader has little support left in his home country, however, after it was discovered following his escape to Russia that he had been living lavishly, in a sumptuous palace with a private zoo, a replica pirate ship and pure gold fittings, while the country sank further into debt.