SLAVIANSK, Ukraine - Pro-Russian separatists in eastern Ukraine offered on Saturday to release eight captive international observers in a prisoner exchange, as Western governments prepared new sanctions against Moscow.
The pro-Western government in Kiev blamed Russia for what it called the kidnapping on Friday of the monitors from the Organisation for Security and Cooperation in Europe (OSCE).
The separatists said they suspected the observers of spying; Ukraine said they were being used as human shields.
Since Ukrainians toppled their pro-Russian president in February, Russia has annexed Ukraine's Crimean peninsula and massed tens of thousands of troops on the country's eastern border. NATO has responded by sending reinforcements to eastern Europe, in the gravest East-West crisis since the Cold War.
Earlier on Saturday the Group of Seven major economies announced they had agreed to impose more sanctions on Russia, which they believe is bent on destabilizing its former Soviet neighbour and possibly grabbing more territory. Diplomats said the United States and the European Union were expected to unveil new punitive action against Russian individuals from Monday.
Russia denies orchestrating a campaign by pro-Moscow militants who have seized control of public buildings across eastern Ukraine. It accuses the Kiev government of whipping up tensions by sending troops to root out the separatists.
The OSCE sent more monitors on Saturday to seek the release of those detained in Slaviansk, a city under the separatists' control. Those being held are from Germany, Sweden, Denmark, Poland and the Czech Republic.
"COINS TO EXCHANGE"
Vyacheslav Ponomaryov, de facto mayor of Slaviansk, told reporters: "They were soldiers on our territory without our permission, of course they are prisoners."
He said the separatists were ready to exchange the captured monitors for fellow rebels now in the custody of the Ukrainian authorities.
"Prisoners have always been coins to exchange during times of war. It's an international practice," he said.
Ukraine's state security service said the OSCE observers - part of a German-led military verification mission deployed since early March at Kiev's request - were being held "in inhuman conditions" and that one needed medical help.
A spokeswoman for the Vienna-based organisation, of which Russia is a member, said the OSCE had been in contact with "all sides" since late on Friday but had had no direct contact with the observers.
The Russian foreign ministry said it was working to resolve the crisis, but blamed Kiev for failing to ensure the OSCE mission's safety in "areas where the authorities do not control the situation and where a military operation against residents of their own country has been unleashed".
Russia's Komsomolskaya Pravda newspaper released a video interview with a man it identified as Ivan Strelkov, a militia leader in Slaviansk, accused by Ukraine's security services of being an employee of Russian intelligence.
He suggested the monitors might have been using their diplomatic status "to carry out reconnaissance of the resistance positions, for the benefit of the Ukrainian army".
It is standard practice for serving military officers to be seconded to OSCE missions.