KRAMATORSK, Feb. 10 - Rockets killed more than 10 civilians and soldiers deep in Ukrainian government-held territory on Tuesday and rebels pushed on with an assault on an army-held rail junction, setbacks that showed Kiev's position worsening on the eve of peace talks, Reuters reported.

Advances by pro-Russian rebels diminished hopes of a deal when Russia, Ukraine, France and Germany hold a summit in Belarus on Wednesday under a new Franco-German initiative to halt fighting in a war that has killed more than 5,000 people.

Representatives of the "Contact Group" meeting in Belarus on the Ukraine crisis denied a report by Russia's TASS news agency that a ceasefire deal had been reached in talks in Minsk. Rebel representative Denis Pushilin told Russian channel Rossiya24 it was too early to talk of any agreements and said the sides were taking a break.

European officials say it is difficult to imagine the rebels agreeing to halt and go back to earlier positions after weeks during which they have been advancing relentlessly.

A Russian source quoted by the state RIA news agency said there were no plans to sign a document to resolve the conflict at the peace talks, and the main subject would be creation of a demilitarized zone.

The war and years of endemic corruption have nearly bankrupted Ukraine, where the currency collapsed last week. Ukraine is negotiating a rescue package with the International Monetary Fund and sources said that could be expanded dramatically to provide as much as $40 billion in aid.

The White House said U.S. President Barack Obama urged Russian President Vladimir Putin in a phone call on Tuesday to agree to a peace deal.

"If Russia continues its aggressive actions in Ukraine, including by sending troops, weapons, and financing to support the separatists, the costs for Russia will rise," the White House statement added.
The Kremlin, in its statement about the call, said Putin and Obama highlighted the need for the need for a political solution to the "internal" conflict in Ukraine.

The Kremlin also said the two leaders also noted the necessity to safeguard the rights of inhabitants of all Ukrainian regions, including Russian-speakers in the east.

Rockets crashed into Kramatorsk, some 50 km (30 miles) north of the front, hitting the main headquarters of the Ukrainian military campaign in the east, as well as nearby residential areas. Local officials said at least seven civilians were killed, while 26 civilians and 10 soldiers were wounded. A parliamentary deputy said four soldiers were also killed.

Kiev announced on Tuesday its forces launched a counter-offensive in the southeast to relieve separatist pressure on the port of Mariupol, the biggest city in the rebellious provinces still in government hands. Details could not be confirmed, but it is unlikely to provide much relief on the main battle front where government forces have been steadily pushed back.

President Petro Poroshenko said Wednesday's talks would be one of the last chances to declare an unconditional ceasefire and withdraw heavy weaponry, proposals that appear to have more appeal to retreating Kiev than to advancing rebels.

The renewed fighting has brought calls in the West for more pressure against Moscow. Obama is weighing whether to deliver weapons to Kiev. (rt/ez)