U.S. President Barack Obama talks during a press conference at the Bank of Estonia in Tallinn, Estonia Thomson Reuters By Balazs Koranyi, Steve Holland and David Mardiste

TALLINN (Reuters) - U.S. President Barack Obama urged NATO on Wednesday to help strengthen Ukraine's military and said the alliance must leave the door open to new members to counter what he called Russian aggression.

Obama was speaking in Estonia, one of three ex-Soviet Baltic states bordering Russia that fear separatist rebellion in eastern Ukraine could herald problems for them. All three have sizeable Russian minorities and rely on Russian fuel deliveries.

Obama, who will attend a NATO summit in Wales on Thursday, accused Russia of a 'brazen assault' on Ukraine, which for five months has been fighting pro-Russian separatists that Moscow describes as a defense force warding off Ukrainian aggressors.

"NATO must make concrete commitments to help Ukraine modernize and strengthen its security forces. We must do more to help other NATO partners, including Georgia and Moldova, strengthen their defenses as well," he said a speech to a packed concert hall in the Estonian capital.

"And we must reaffirm the principle that has always guided our alliance, for countries that meet our standards and that can make meaningful contributions to allied security, the door to NATO membership will remain open," he said after meeting the leaders of the three ex-Soviet Baltic states.

Georgia fought a brief and disastrous war with Russia over a breakaway territory in 2008.

He said Washington would continue to offer training and assistance to help Ukraine's military gain strength.

In alluding to admission of new members in future, he made no explicit reference to Ukraine - something that would certainly have infuriated Russia.

Under the NATO treaty, an attack on any individual NATO state would be treated as an attack on all alliance members.

The Baltic states joined NATO and the European Union (EU) in 2004. Ukraine is not a member of either alliance, though it has repeatedly called for membership of both.

The current crisis unfolded when demonstrations in Kiev toppled a Kremlin-oriented president who had pulled back from a cooperation deal with EU in favor of closer ties with Moscow. Russia has described his fall as a coup backed by Ukrainian fascists and accuses Ukrainian forces of indiscriminate killing of ethnic Russian civilians in its bid to quell the rebellion.

“In terms of actions, we’ve seen aggression and appeals to national sentiments that have historically been very dangerous in Europe and are rightly a cause of concerns," Obama said at a news conference before his speech.

Ukraine announced on Wednesday that it had agreed with Russia's Vladimir Putin on steps toward a "ceasefire regime" in Kiev's conflict with pro-Russian rebels, but the Kremlin denied any actual truce deal.

Ukraine on Wednesday called Russia a "terrorist state" and said it was solely to blame for the conflict in the east. Washington estimates that are thousands of Russian forces inside Ukraine.

Russia, for its part, denies it has sent armor or troops into eastern Ukraine, a largely-Russian speaking area which has seen separatist fighting since April. Over 2,600 have died in the conflict that has stirred the biggest crisis in Russia's relations with the West since the Cold War.

SPENDING, SANCTIONS

Obama also called on European states to increase their defense spending.

"This week’s summit is the moment for every NATO nation to step up and commit to meeting its responsibilities to our alliance, Obama said.

Military spending among European NATO members was 1.6 percent of GDP last year, below the 2 percent goal and only three countries -- Britain, Estonia and Greece -- reached the minimum needed while several east European countries spent less than 1 percent.

Speaking about concerns that Russia's expansion could hit the Baltics, where ethnic Russians make up a sizable minority, Obama said NATO would not hesitate to protect one of its members, even on the periphery of the alliance.

"We’ll be here for Estonia. We’ll be here for Latvia. We’ll be here for Lithuania. You lost your independence once before. With NATO, you’ll never lose it again," Obama said.

Latvia has an ethnic Russian population of about 26 percent, Lithuania, somewhat lower at six percent and Estonia about a quarter Russians.

Dismissing accusations that European and U.S. sanctions against Russia were ineffective, Obama said Russia was already in recession and output from its vital energy sector will drop.

"Capital is fleeing and foreign investment is plummeting because investors know that today’s Russia is a bad bet," Obama said. "Its credit rating is near junk status, and the rouble just fell to an all-time-low."

The EU is expected to approve fresh sanctions against Moscow on Friday with the U.S. expected also to announce similar measures. The new measures are expected to make it harder for companies in Russia's state-dominated economy to obtain overseas financing.

U.S. and EU sanctions steadily tightened since March have already made it hard for many Russian firms to borrow, scaring investors and contributing to billions of dollars in capital flight that has wounded the Russian economy.

(Editing by Ralph Boulton)