Ukraine truce for 3 more days: president

Ukrainian President Petro Poroshenko has agreed to extend the ceasefire in eastern Ukraine by three days, his office has announced.

The ceasefire will extend 72 hours until 1900 GMT on Monday (0500 AEST on Tuesday).

Earlier on Friday, pro-Russian separatists in eastern Ukraine said that they were ready to prolong a ceasefire with government troops.

"Poroshenko prolonged the ceasefire until June 30. We will also cease fire in this period," Alexander Borodai, a leader of the self-proclaimed "Donetsk People's Republic," said after talks with mediators representing the Ukrainian government, the Interfax news agency reported.

Poroshenko visited Brussels on Friday to sign a long-expected free trade agreement with the European Union.

His predecessor Viktor Yanukovych's decision not to sign the deal in November triggered mass protests that led to his ouster in February.

French President Francois Hollande said that he would hold a call on Sunday with Poroshenko, Russian President Vladimir Putin and German Chancellor Angela Merkel.

Hollande, Merkel and their fellow 26 EU leaders issued an ultimatum to Russia on Friday, threatening fresh sanctions if there is no progress by Monday.

The leaders said that they "regret that the ceasefire, while being respected by the Ukrainian authorities, has not led to the full cessation of military hostilities."

They demanded agreement on a mechanism to monitor the ceasefire and border controls; the return to Ukrainian control of three border posts held by separatists; the release of all separatist-held hostages, including international observers; and the start of "substantial" negotiations on a peace plan.

Poroshenko downplayed the threat of sanctions, saying that Ukraine does not want to see Russia harmed.

"We do not need sanctions for sanctions' sake ... We need peace," he said in Brussels.

The EU has so far responded to events in Ukraine by imposing asset freezes and visa bans on individuals and companies, while preparing wider-reaching measures that could affect sectors of the economy.

The US government said it "absolutely" agreed with the demands on Russia by the European Council and has in the past indicated it would co-ordinate its own sanctions against Russia with those of the EU.

In Ukraine, Borodai said that the separatists were ready to exchange prisoners with the government and to allow observers from the Organisation for Security and Co-operation in Europe (OSCE) to visit rebel-held posts along the border with Russia.

However, he was adamant that the separatists would not cede control of key border posts to Ukraine.

The OSCE, Europe's top security watchdog, had participated in Friday's talks in Donetsk.

The organisation said earlier on Friday that four of eight missing international observers in the region had been released after one month of captivity.

Footage by Russia's Ria Novosti state news agency showed the observers from Estonia, Switzerland, Turkey and Denmark being handed over to OSCE officials in Donetsk.

The four released OSCE observers were flown out of Dnipropetrovsk in a Swiss Air Force aeroplane and arrived in Vienna late on Friday, OSCE confirmed.

Borodai described their release as a goodwill gesture and promised that the second team, believed to be in the town of Severodonetsk in the neighbouring Luhansk region, would also be released soon.

It was unclear who had been holding the observers.

A source in the Donetsk separatist leadership told Interfax that they are being held by "an independent field commander".

According to the OSCE, no one claimed responsibility.

Reports of conflicts within the separatist camp have been mounting in recent weeks, culminating in the arrest of Vyacheslav Ponomaryov, the self proclaimed mayor of the rebel stronghold Sloviansk, by local field commander Igor Strelkov.

Five Ukrainian soldiers were killed when pro-Russian separatists attacked government checkpoints with tanks outside Sloviansk, Ukrainian officials said on Friday.

Andriy Lysenko, the spokesman of Ukraine's national Security and Defence Council, said that one tank was destroyed and two more had been captured.

Separatists have claimed to have captured the Soviet-era T-64 tanks from Ukrainian army depots, but Ukrainian and foreign officials maintain that they were secretly delivered from Russia.