Milan (AFP) - Vladimir Putin meets his Ukrainian counterpart and EU leaders here on Friday fresh from warning he could pull the plug on crucial Russian gas supplies to Western Europe this winter.

Ukrainian President Petro Poroshenko said he hoped the breakfast meeting with the Russian leader would help shore up a patchy ceasefire between his government forces and pro-Moscow rebels in the east of Ukraine.

"Peace and stability in Ukraine, it is the only thing we expect," Poroshenko told reporters late Thursday after talks with Angela Merkel.

The German Chancellor went to have a late night meeting with Putin, who on Thursday upped the stakes in his confrontation with the West by warning that the flow of Russian gas to EU countries could face "major transit difficulties" this winter.

The diplomatic shuttling over Ukraine is taking place on the sidelines of an Asia-Europe (ASEM) summit that has been completely overshadowed by the crisis, which has deepened in recent days.

NATO said it had seen no sign of any major Russian pullback from the Ukrainian border despite Putin saying earlier this week nearly 18,000 troops had been withdrawn from the frontier.

US and European Union leaders had welcomed that announcement as a positive gesture ahead of the Poroshenko talks but also reminded Putin that sanctions would remain in place until he stopped meddling in Ukraine completely.

With the financial markets in turmoil, partly due to the uncertainties over Ukraine, Merkel had earlier tried to put the ball firmly in Putin's court.

Merkel said it was "first and foremost" Russia's responsibility to make sure a ceasefire and peace plan agreed last month with the rebels "really will be implemented."

Merkel, French President Francois Hollande, British Premier David Cameron and Italian leader Matteo Renzi are all due to sit in on the Putin-Poroshenko meeting.

"It will be an opportunity to deliver a collective message that Putin has to start real peace negotiations," said an aide to Hollande.

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Friday's meeting was always expected to be difficult and the latest exchanges appear to make that more likely.

Putin has this week accused US President Barack Obama of outright hostility towards Russia and insisted he would not be blackmailed by the West.

The Russian president has also played his gas trump card, effectively reminding Europe that it gets about a third of its supplies from Russia.

Putin insisted he did not want to see a repeat of 2006 and 2009 when interruptions of supplies to Ukraine disrupted onward deliveries to Europe which gets about a third of its gas from Russia.

"I am very much hoping that it will not come to that," Putin said.

The ASEM summit brings together more than 50 member states who share one of the world's largest trading relationships at a time of growing uncertainty over the economic outlook.





- 'International uncertainty' -





Those problems showed themselves Thursday as the financial markets sold off sharply once again on fears over Europe's stalled recovery and a slowdown in China, which for so long has been the driver of global growth.

"There is international uncertainty, the United States is slowing down, Europe has not found a way back to growth," French President Hollande said.

European Union leaders meanwhile stressed the need for ties with Asia to boost both economies, given the prospect of slower growth.

"My main message... is that today more than ever European and Asian nations need each other to achieve growth and development and to guarantee security and preserve stability," EU president Herman Van Rompuy said.

On the opening day of the summit, Thai junta leader Prayut Chan-O-Cha meanwhile sparked protests by human rights activists angry to see ASEM offering a welcome to the former general who seized power in a May military coup which the EU condemned sharply.

It emerged late on Thursday that Prayut had been granted a bilateral meeting with Japanese Prime Minister Shinzo Abe at the start of the summit.

Officials said the Japanese premier had told the former general that massive Japanese investment in Thailand could be at risk, over time, if he did not restore democracy and eliminate the risk factor caused by political instability.