Intense fighting is raging in eastern Ukraine and an insurgent leader says rebels are losing the battle.
Both the government and the rebels said fighting was taking place near Krasnyi Liman, just east of the rebel stronghold of Slovyansk.
The city in the Donetsk region has been the epicentre of the insurgency in Ukraine.
Rebel chief Igor Strelkov said in a statement on YouTube that his men are far outnumbered and outgunned by Ukrainian forces and are likely to retreat.
He said the Ukrainian military advance would completely cut rebel supply lines to Slovyansk and issued a desperate plea to the Kremlin for military assistance.
Russian President Vladimir Putin, in a bid to avoid further Western sanctions, has stonewalled the insurgents' pleas to join his country and welcomed a peace plan proposed by the Ukrainian president.
It comes after Nato secretary general Anders Fogh Rasmussen said Russia has resumed a military build-up near Ukraine. He criticised the move as 'a very regrettable step backward'.
Mr Rasmussen said: 'I can confirm that we now see a new Russian military build-up - at least a few thousand more Russian troops deployed to the Ukrainian border, and we see troop manoeuvers in the neighbourhood of Ukraine.'
He added: 'If they're deployed to seal the border and stop the flow of weapons and fighters, that would be a positive step. But that's not what we're seeing.'
Instead, the Nato chief said, Russia appears bent on using its military to intimidate Ukraine further.
'I consider this a very regrettable step backwards and it seems that Russia keeps the option to intervene further,' Mr Rasmussen said.
'So the international community would have to respond firmly if Russia were to intervene further. That would imply deeper sanctions, which would have a negative impact on Russia.'
Nato estimated at one point there were up to 40,000 Russian forces deployed near the border with Ukraine, but reported last month that many of the soldiers and their equipment had been pulled back.
US treasury secretary Jacob Lew has made clear that Moscow will face further punishment if it keeps backing anti-government militants.
The US and European Union have imposed sanctions on some Russian officials but stopped short of fully fledged economic sanctions.
Mr Lew stressed the importance of US-European coordination after meeting German finance minister Wolfgang Schaeuble.
He said 'Russia has a fundamental choice to make' and must support a peace plan rather than continuing support for separatists in Ukraine and allowing weapons to cross the border.
'Russia has to understand that if it goes the other way, there will have to be additional consequences,' he added.
Mr Strelkov said: 'I hope that they have enough conscience left in Moscow to take some measures.'
Mr Putin has also welcomed a peace plan and proposed cease-fire put forward by new Ukrainian president Petro Poroshenko.
But it requires a secure border between Russia and Ukraine, Mr Poroshenko said, and it is not clear when that will happen.
Russia has dismissed Ukrainian and Western claims that it is fomenting the rebellion in the east, saying that Russian citizens among the rebels were volunteers.
It also rejected Western reports that it has sent heavy artillery across the border to the rebels.
Denis Pushilin, one of the insurgent leaders in Donetsk, said the rebels did have a few tanks, but they had seized them from Ukrainian forces.
Yesterday, Ukraine's new president promised a unilateral cease-fire to jump-start his plan to end fighting in the east, where government forces have struggled to suppress the pro-Russian insurgency for two months.
Next week, foreign ministers and leaders of the European Union are holding meetings at which relations with Ukraine and Russia will be key topics, including whether Russia's actions toward Ukraine warrant imposing tougher economic sanctions.
Press Association
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