Kiev (AFP) - Ukraine's pro-European leaders and Kremlin-backed rebels agreed Wednesday to hold long-delayed peace talks that were backed by Russia in the heat of its devastating currency crisis.

Sunday's meeting in the Belarussian capital Minsk was announced hours after German Chancellor Angela Merkel placed a late-night call to Russian President Vladimir Putin. Their first reported exchange in weeks was later joined by Ukrainian President Petro Poroshenko and his French counterpart Francois Hollande.

Western powers have noted a recent diplomatic softening from Russia that coincides with the onset of the most severe and potentially long-lasting crisis of Putin's 15-year rule.

The ruble's white-knuckle plunge in value has set off talk of a bank run that would puncture Putin's reputation as a wise and assured leader who could guarantee stability after the chaotic decades that surrounded Communism's collapse.

Visiting EU foreign policy chief Federica Mogherini said Poroshenko and she "shared the impression that there might be... some more willingness to solve the conflict on the Russian side, on President Putin's side."

Poroshenko said on a visit to Poland he hopes will result in future arms sales that he expected the meeting to happen on Sunday.

He added that video conference negotiations have been set for Thursday and Friday to iron out the last details.

He expressed "optimism" on Polish television about the turn of events but called the situation in Ukraine's rebel-controlled east a "humanitarian crisis".

A top separatist meanwhile confirmed that talks also involving European and Russian envoys would indeed go ahead for the first time since a similar September 5 gathering produced a tenuous truce.

"There will be a meeting in Minsk but its agenda has not been fully agreed," Donetsk rebel commander Alexander Zakharchenko told Russia's RIA Novosti state new agency.

Another Donetsk rebel said the conference had been held up by Kiev's refusal to discuss its suspension of pension payments and other basic social services in rebel-held lands in the industrial east.

Story continues

"The Ukrainian side particularly refuses to talk about lifting its economic blockade and other economic issues," Denis Pushilin told AFP by telephone.





- US lethal weapons -





Moscow this week said it no longer insists on Kiev ceding more powers to Russian-speaking regions or giving in to the insurgents' autonomy demands.

Russian Foreign Minister Sergei Lavrov also called Poroshenko "the best chance Ukraine has at the moment" for resolving a conflict that has killed more than 4,700 and left the ex-Soviet republic effectively bankrupt.

But both the United States and European Union still intend to intensify their sanctions on Russia -- a decision designed to demonstrate Western resolve and refusal to be swayed by a visibly troubled Putin team.

"I hope that the expressions of willingness from the Russian side in the recent days and hours will (be followed by) consequent choices and acts," the European Union's Mogherini said in Kiev.

NATO believes Russia has not only funded and armed the insurgents but also backed them up with elite forces that in August exacted such heavy Ukrainian losses Poroshenko soon agreed to truce talks.

The European Union bloc was to discuss relations with Russia on Thursday.

There were conflicting signals over whether new sanctions were on the table, with some diplomats saying nothing will be decided, and others that the EU could ban investments in Crimea -- a Black Sea peninsula Moscow seized weeks after the February ouster in Kiev of a Kremlin-backed government.

US President Barack Obama has indicated he plans this week to sign a bill allowing him to provide lethal military aid to Ukraine for the first time.

Obama had previously resisted the measures -- and its accompanying sanctions on Russia's Rosoboronexport state arms trader and Gazprom gas firm -- fearing they might backfire and entrench Putin even more.

But the measures have been strongly defended by powerful Republicans who will take control of the US Senate next month.

The new Congress "will have a greater Republic presence, so any re-do of the legislation may well be less acceptable to the president," said John Herbst of the Atlantic Council.

The Washington think tank added that the bill's authorisation for direct arms deliveries "explicitly pressures the president to respond to Ukraine's request for weapons."

Poroshenko's office said the president Thursday would submit to parliament a bill lifting Ukraine's "non-bloc" status that prevented Kiev from joining NATO or any other military alliance.

The proposal has been furiously opposed by Russia and is likely to raise diplomatic tensions.