Ukraine claims it has regained control of swathes of the separatist east even as Washington expressed concern over the appearance of fighters from Russia's war-ravaged region of Chechnya among the insurgents.
The rebels for their part dismissed speculation of a rift in their ranks after a dozen local militants were evicted from their seat of power in Donetsk by a military brigade comprised largely of Chechens and other Russians from the volatile North Caucasus.
The appearance among the separatists of trained gunmen from Chechnya - a mostly Muslim region that fell under Kremlin control following two post-Soviet wars for independence - has fuelled fears of the conflict being transformed into a proxy war involving elements from other unstable regions of the former Soviet Union.
Ukraine's acting defence minister said his forces were in high spirits despite the downing of a military helicopter on Thursday by the rebels that killed 11 soldiers and a general.
"Our armed forces have completed their assigned missions and completely cleared the southern and western parts of the Donetsk region and the northern part of the Lugansk region from the separatists," Mykhailo Koval told reporters on Friday.
Rebels in control of the Lugansk and Donetsk government buildings have declared independence and are seeking a merger with Russia similar to that accomplished by Crimea following its seizure by pro-Kremlin troops in March.
Ukraine's acting defence chief said his soldiers intended to push ahead with their so-called "anti-terrorist operation" despite demands by Moscow for all military activities to come to an immediate halt.
Ukraine's acting president Petro Poroshenko also vowed to punish those who used a sophisticated surface-to-air missile to shoot the MI-8 helicopter out of the Lugansk sky.
"We have to do everything we can to ensure no more Ukrainians die at the hands of terrorists and bandits. These criminal acts by the enemies of the Ukrainian people will not go unpunished," Poroshenko said.
The 48-year-old confectionary tycoon who backs closer ties with Europe won nearly 55 per cent of Sunday's presidential ballot.
He has since reached out to Putin and promised to hold his first talks with the Russian leader when they both attend D-Day commemorations in Normandy on June 6.
But Putin has yet to confirm the meeting.
US Secretary of State John Kerry said he was encouraged by signs Russia was pulling its troops back from Ukraine's eastern border.
But he said the appearance of Chechens in Donetsk and Lugansk was a dangerous new development that Putin should quickly address.
"There is evidence of Russians crossing over, trained personnel from Chechnya trained in Russia who've come across to stir things up, to engage in fighting," Kerry said.
Ukraine's cash-strapped government hopes to avert another immediate threat when the European Union holds last-gasp talks in Berlin on Friday in a bid to avert a possible cutoff of Russian gas supplies.
Kiev missed a midnight Thursday deadline to pay Russia 1.5 billion euros ($A2.25 billion) under an EU-brokered agreement or face a halt in gas supplies next week that would also hit parts of Europe.
Russia's state-owned natural gas giant Gazprom said a failure to pay will scuttle negotiations on a lower gas price and prompt it to proceed with a cut-off that would hit parts of Europe next Tuesday unless a larger payment of more than 3.7 billion euros ($A5.55 billion) is made by Monday night.
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