Ukraine and rebels to seek peace plan, ceasefire on Friday

Ukrainian President Petro Poroshenko and the main pro-Russian rebel leader said they would both order ceasefires on Friday, provided that an agreement is signed on a new peace plan to end the five month war in Ukraine's east.

The first apparent breakthrough of its kind in the war comes after a week in which the pro-Moscow separatists scored major victories with what NATO says is the open support of thousands of Russian troops.

Speaking on the sidelines of a NATO summit in Wales, Poroshenko said the ceasefire would be conditional on a planned meeting going ahead in Minsk on Friday of envoys from Ukraine, Russia and Europe's OSCE security watchdog.

"At 1400 local time (7.00 a.m. EDT on Friday), provided the (Minsk) meeting takes place, I will call on the General Staff to set up a bilateral ceasefire and we hope that the implementation of the peace plan will begin tomorrow," Poroshenko told reporters.

Rebel leader Alexander Zakharchenko said in a statement that the separatists would also order a ceasefire, from one hour later, provided that Kiev's representatives signed up to a peace plan at the Minsk meeting.

The announcements come a day after Russia's President Vladimir Putin put forward a seven-point peace plan, which would end the fighting in Ukraine's east while leaving rebels in control of territory.

So far there has been no sign of a halt in fighting in the east, where rebels have rapidly advanced in the past week, backed by what Kiev and NATO say is the support of thousands of Russian troops with artillery and tanks.

Moscow denies its troops are there, in the face of what the West says is overwhelming evidence.

Reuters journalists heard explosions and saw columns of smoke on the eastern outskirts of Mariupol, a government-held port of 500,000 people that is the next big city in the path of the rebel advance. A Ukrainian military source said troops were bracing for a potential attack on the city.

Reuters reporters also heard government shells rain down overnight on a residential district Donetsk, capital of one of the rebels' two self-proclaimed independent states.

Poroshenko won support from Western leaders at the NATO summit. The West has backed Kiev by imposing economic sanctions on Moscow, but has also made clear it will not fight to protect the country, where pro-Russian rebels rose up in two provinces after Moscow annexed the Crimea peninsula in March.

The Ukrainian president was invited to meet U.S. President Barack Obama, Germany's Angela Merkel, France's Francois Hollande and other Western leaders at a summit of NATO in Wales hosted by Britain's David Cameron.

"To the east, Russia has ripped up the rule book with its illegal, self-declared annexation of Crimea and its troops on Ukrainian soil threatening and undermining a sovereign nation state," Obama and Cameron wrote in a joint newspaper editorial.

Hollande brought the biggest surprise on the eve of the summit: postponing the delivery of a helicopter carrier warship to Russia, a measure he had long resisted. Moscow accused him of caving in to U.S. political pressure.

"France's reputation as a reliable partner that carries out its contractual obligations has been thrown into the furnace of American political ambitions," Russian Foreign Ministry deputy spokeswoman Maria Zakharova wrote on Facebook.

CONFLICTING SIGNALS

The past few days have seen conflicting signals from both Moscow and Kiev. Putin made a number of belligerent statements over the past week before unveiling his peace proposal on Wednesday and discussing it by telephone with Poroshenko.

The Ukrainian leader hinted at a possible ceasefire on his website on Wednesday, but that wording was later dropped. His prime minister, Arseny Yatseniuk, derided Putin's peace proposal as a "deception" and said Putin's real aim was to "destroy Ukraine and restore the Soviet Union".

Ukraine has previously refused to discuss any political deal with the rebels, calling them international terrorists and proxies of Moscow. But with the hope evaporating in the past week of a swift victory over the rebels, Poroshenko may have been convinced that it is now time to hear the Kremlin's offer.

This week the rebels dropped a demand for full independence and said they would accept some kind of special status in Ukraine. That lifts one of the main obstacles to peace talks.

Russian Foreign Minister Sergei Lavrov accused Washington of trying to undermine the nascent peace process.

"The surge in anti-Russian rhetoric that we have seen exactly when there is a very active effort to seek a political solution shows that the party of war in Kiev has active external support, in this case from the United States," he said.

Putin's peace offer would leave rebels in control of territory that accounts for a tenth of Ukraine's population and an even larger chunk of its industry.

It would also require Ukraine to remain unaligned. Kiev said last week it would try to join NATO, although full membership in the Western military alliance is still an unlikely prospect, since several members oppose it.

On the ground, there has so far been no sign yet of any ceasefire. Government forces shelled the southern outskirts of the rebel bastion of Donetsk overnight.

Water supplies in the city, which had a pre-war population of nearly 1 million people, stopped working overnight. Local authorities said an electric plant used for pumping had been damaged and they would try to supply water in tankers.

BOMB SHELTER

Houses in Donetsk's leafy Petrovka district were pockmarked with shrapnel. Residents had sought refuge in a bomb shelter.

"I don't think they can reach any agreements now. Each side comes up with conditions unacceptable for the other. And so we get shelled," said Lena, a resident who declined to give her surname.

Government troops had been on the offensive since Poroshenko was elected in June, squeezing the rebels into two provincial capitals, Donetsk and Luhansk.

But last week the rebels turned the tide with a dramatic advance that scattered government troops on a new front along the coast of the Sea of Azov that separates the rebellious provinces from Crimea, which Russia seized and annexed in March.

The front line has drawn closer to Mariupol, where government forces and local residents have been digging trenches to hold off an assault. The second biggest city in rebellious Donetsk province, Mariupol has been in government hands since June when separatists were driven out with the help of patrols of local metalworkers.

A NATO officer said there was no sign that Russia had drawn down its forces in Ukraine after Putin's peace offer. The officer, speaking on condition of anonymity, said NATO believed there were several thousand Russian troops in Ukraine, with hundreds of tanks and armored vehicles, which he said represented "no significant change".

NATO leaders are expected to take new steps at their summit to defend alliance members near Ukraine, including setting up a rapid reaction force. But the alliance has made clear it will not fight to defend non-member Ukraine itself. Western countries are relying instead on economic sanctions to pressurize Moscow.

The European Union is considering new sanctions this week which could tighten financial restrictions on Russian companies. Russia has responded to sanctions by banning imports of most Western food.

(Additional reporting by Gabriela Baczynska in Donetsk, Pavel Polityuk and Gareth Jones in Kiev, Katya Golubkova and Timothy Heritage in Moscow and Kylie MacLellan in Newport; Writing by Peter Graff; Editing by Giles Elgood)