Ukraine reports three killed

Although Ukrainian President Petro Poroshenko had announced an extended ceasefire between government troops and separatist rebels in eastern Ukraine, three Ukrainian soldiers died in clashes near the eastern city of Slaviansk on Saturday.

"As a result of the (rebel) fighters shooting at the post near Slaviansk, three members of the Ukrainian forces were killed and a fourth was wounded," Ukrainian military spokesperson Oleksiy Dmitrashkovsky was quoted as saying by the Interfax news agency.

The troops were part of Ukraine's "anti-terrorist operation," Dmitrashkovsky said, and were occupying a post near Slaviansk when they were attacked with small arms and mortar fire.

EU increases pressure

A week-long ceasefire between the Ukrainian military and pro-Russian rebels expired on Friday night but was extended by 72 hours. Poroshenko extended the tenuous truce when he returned to Kyiv from Friday's summit in Brussels, where he signed a landmark Ukrainian free trade and political association deal with the EU, despite Russian objections.

The EU summit on Friday also demanded that the rebels release all hostages, including international Organization for Security and Cooperation in Europe (OSCE) observers, and start substantial talks on a peace plan. Four OSCE observers being held in Donetsk were released late Thursday, and the OSCE Special Monitoring Mission to Ukraine announced Saturday that a further four observers being held in Luhansk had also been set free.

The 15-point plan was outlined by Poroshenko a week ago but the rebels refused to lay down their arms.

Donetsk separatist leader Miroslav Rudenko claimed that government troops were using the extension -- which runs until 1900 UTC Monday -- to strengthen their positions.

In Washington, US State Department spokeswoman Marie Harf said the United States was ready to tighten financial and defense sector sanctions on Russia if the rebels failed to meet demands.

Russia facing economic impacts

A new round of Western "phase three" sanctions would impact Russia "seriously," Russia's Economy Minister Alexei Ulyukayev warned on Saturday, according to the Rossiya television channel.

He said the worst of three scenarios, whereby Western sanctions would apply to metals, fertilizers, oil and gas, would shove Russian economic growth rates "seriously into the negative."

So far, EU and US sanctions have targeted specific individuals and entities, with the EU reluctant to press ahead because it relies on Russia for part of its energy supplies.

Twelve weeks of unrest in Ukraine have claimed more than 440 lives and displaced thousands of people, especially in eastern and southern regions.

The conflict deepened in February when Ukraine's previous president opted for closer ties with the Kremlin and ditched the very EU accord that Poroshenko signed on Friday.

mz/kms (Reuters, AP, AFP, dpa)