Obama warns Russia over escalating Ukraine crisis

Pro-Russian militants in Ukraine Sunday presented a captured team of international observers as "prisoners of war," raising the stakes in the crisis as United States 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 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."

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 over the the crisis, 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 over the crisis as Europe and the US prepare fresh sanctions against Moscow expected to come into force as early as Monday.

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.

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

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

In a statement on Saturday, the G7 -- comprising the United States, Britain, Canada, France, Germany, Italy and Japan -- said it would "move swiftly" to impose additional sanctions on Russia.

The EU said top officials would meet on Monday 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.

"It's important that we are part of an international coalition sending that message and that Russia is isolated in its actions," he said.

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.

The confrontation escalated after Russia refused to accept the legitimacy of Kiev's new pro-EU government, which came to power in February after four months of street protests forced the ouster of the Kremlin-backed president, Viktor Yanukovych.

While Obama has ruled out sending US or NATO forces into Ukraine, Washington has begun deploying 600 US troops to bolster NATO's defences in nearby eastern European states.

Ukrainian Prime Minister Arseniy Yatsenyuk cut short a trip to the Vatican on Saturday to rush home to deal with the crisis.

He has accused Russian warplanes of multiple incursions into Ukrainian airspace in an attempt to provoke Kiev into starting "a third world war".