UK & World News
Sanctions Warning Amid Ukraine Ceasefire
Reports of shelling in Ukraine's eastern city of Mariupol have disrupted a day-old ceasefire as Moscow warns it "will react" if the European Union imposes new sanctions over the crisis.
Sky News' Moscow Correspondent, in Mariupol, has reported a series of explosions in the eastern outskirts of the city, around a Ukrainian army checkpoint.
"They are not as loud as what we were hearing 48 hours ago, but they have been fairly steady," she said.
"This does not necessarily mean the end of the ceasefire. It is not unusual for there to be skirmishes during a ceasefire - the test is going to be whether this turns into anything more overnight."
The truce had largely been holding since it came into force on Friday at 4pm UK time.
Earlier Ukraine President Petro Poroshenko's office said in a statement: "The two heads of state stated that overall the ceasefire was being implemented and discussed steps to achieve a permanent ceasefire.
"They also stressed the need for the maximum involvement of the Organisation for Security and Cooperation in Europe (OSCE) in monitoring the situation."
The truce includes an agreement on the release of prisoners on both sides, the delivery of humanitarian aid and the withdrawal of heavy weapons.
Mr Poroshenko said Kiev was also ready to grant a significant decentralisation of power and economic freedom to the restive eastern region.
The ceasefire has raised hopes of an end to the five-month conflict which, according to the UN, has killed more than 2,600 people.
Despite the deal, European leaders agreed to hit Russia with a fresh round of sanctions, including credit restrictions on Russian companies and export bans.
The West has accused Moscow of sending tanks and troops over the border in support of the rebels, but this is denied by the Kremlin.
The EU said sanctions could be suspended if Russia withdraws its troops from Ukraine and the ceasefire is observed.
But Russia's foreign ministry responded angrily to reports of fresh sanctions, promising an unspecified "reaction" if they were introduced.
Meanwhile, the prime minister of the rebels' self-proclaimed Donetsk People's Republic, Alexander Zakharchenko, said his side would hand over its prisoners to Ukraine on Saturday.
Authorities in Kiev said they wanted the exchange to take place "as fast as possible" but gave no timescale. They said the rebels are holding more than 200 Ukrainians captive.
Despite the truce holding there is little optimism on the ground that the peace will last long.
In Donetsk, a rebel commander, known by his nickname Montana, said: "The ceasefire is looking good for now but we know they (the Ukrainian side) are only using it to bring in more forces here and ammunition and then to hit us with renewed strength."
But the break in fighting was welcomed by a Ukrainian army officer in Mariupol.
He said: "Many of my men had their first good sleep in days. I certainly slept well."
At this week's Nato summit in Wales, plans were announced to create a "Spearhead" rapid response force to counter any Russian aggression in eastern Europe.
But Moscow said joint military exercises planned by Kiev and Nato in Ukraine - and announced along with the Spearhead force - could undermine peace moves.