Ukraine, Europe leaders talk with Moscow before ceasefire expires

Donetsk (Ukraine) - German Chancellor Angela Merkel and French President Francois Hollande will join Ukraine's new leader on a Sunday call to Russia's Vladimir Putin before Kiev's shaky truce with pro-Kremlin separatists expires.

Handout photo released by Bundesregierung, the German government press office, shows French President Francois Hollande (L), Ukraine President Petro Poroshenko (C) and German Chancellor Angela Merkel (R) speaking on June 27, 2014 in Brussels

The second such teleconference in four days was arranged in Brussels on Friday when Ukrainian President Petro Poroshenko put his name to a historic trade deal with Europe that breaks Kiev's bonds with Moscow.

The European Union also warned Putin that he had until Monday to put explicit pressure on the fighters to suspend their 13-week uprising in Ukraine's industrial east or Russia would face punishing economic sanctions.

The Russian strongman is likely to win credit for the rebels' decision on Saturday to release the second and last team of unarmed European monitors they had detained at the end of May.

But the battles have raged on despite the brief ceasefire and Poroshenko has hinted that he may again resort to force should the guerrillas fail to disarm and cede control of state buildings across a dozen cities and towns.

The Ukrainian military reported losing three soldiers in fighting on Saturday. The rebels also mounted two brief attacks on an airfield not far from their base of power in the city of Slavyansk on Sunday morning.

Poroshenko has demanded that the militias give up control of Russian border crossings and help set up a monitoring mechanism for a long-term truce that can put an end to the low-intensity warfare that has already claimed 450 lives.

Kiev and its Western allies accuse Russia of arming and funding the militias in a bid to unsettle the new Ukrainian government as revenge for the February ouster of a pro-Kremlin president who had ditched the very EU agreement Poroshenko signed on Friday.

German Foreign Minister Frank-Walter Steinmeier said the current ceasefire -- due to expire on Monday at 1900 GMT -- 'is a positive sign but it is only the start of a process.'

'The weapons must be silenced in a lasting way to give negotiations a chance of succeeding,' Steinmeier stressed.

- Russia's 'big brother' approach -

The possibility of the United States and Europe freezing access to Russia's banking sector has already dented the country's outlook and raised the possibility of the economy contracting for the first time since the 2008-2009 global financial crisis.

Russia's economy minister warned on Saturday that new sanctions could 'seriously' impact growth that the International Monetary Fund believes may only reach 0.2 percent this year.

But public statements in Moscow indicate it is busy preparing an economic counter-offensive, putting up prohibitive barriers to its trade with Ukraine, which relies heavily on exports to Russia.

Foreign Minister Sergei Lavrov said on Saturday that Russia would treat Ukraine and the ex-Soviet states of Georgia of Moldova that signed their own EU deals on Friday 'based on one criterium -- how (the agreements) might hurt Russian trade'.

Russian and EU ministers have tentatively agreed to meet on July 11 to discuss how Moscow's concerns might be best addressed.

Ukraine's commissioner on European integration said he expected the consultations with Russia to be acrimonious and possibly fruitless.

'Our neighbour has this desire to always act as our big brother, a mentor, to always try teaching us something,' Valeriy Pyatnitskiy told Kiev's Dzerkalo Tyzhnia weekly.

'But if they realise that this is a dialogue of equals, then its obvious that our talks will fail.'

Pyatnitskiy added that Ukraine may have no choice but to appeal to the World Trade Organisation -- a global free commerce club Russia only joined in 2012 -- to step in as a broker of last resort.

'The WTO -- there is no question about it,' Pyatnitskiy said. 'We are already preparing the corresponding work.'