Putin 'urges talks on statehood for east Ukraine'
Rebels have made advances in recent days, entering the port of Novoazovsk
President Putin has called for talks to discuss "statehood" for eastern Ukraine, Russian media report.
He said the issue needed to be discussed to ensure the interests of local people "are definitely upheld".
His comments came after the EU gave Russia a one-week ultimatum to reverse course in Ukraine or face sanctions.
Russia denies Western accusations that its forces illegally crossed into eastern Ukraine to support separatists there.
"Russia cannot stand aside when people are being shot at almost at point blank," he added, describing the rebels' actions as "the natural reaction of people who are defending their rights".
He dismissed the EU's threat of further sanctions, accusing the EU of "backing a coup d'etat" in Ukraine.
The West, Mr Putin said, should have foreseen Russia's reaction to the situation, adding it was impossible to predict how the crisis would end.
His comments suggest the Russian authorities are trying to increase the pressure on Kiev to end its military operation and to start full scale peace talks with the militants, the BBC's Steve Rosenberg reports from Moscow.
Pro-Russian rebels have made gains against Ukrainian troops in recent days in the eastern Donetsk and Luhansk regions.
Some 2,600 people have died in fighting.
The conflict in the east erupted in April following Russia's annexation of Ukraine's southern Crimea peninsula a month before.
Also on Sunday, Russian media reported that 10 Russian paratroopers returned home in exchange for 63 captured Ukrainian soldiers held by Russia.
Thousands have fled the fighting in eastern Ukraine - these refugees have headed to Russia
Pro-Ukrainian residents near the city of Mariupol held a protest on Saturday
Ukrainian troops have lost ground to rebels in recent days
Speaking after a summit in Brussels, European Council President Herman Van Rompuy said the EU "stands ready to take further significant steps in light of the evolution of the situation on the ground", adding that the EU was working urgently on further restrictive measures.
The EU and US have already imposed asset freezes and travel bans on many senior Russian officials and separatist leaders in eastern Ukraine.
Western sanctions also restrict loans for Russian state banks, block defence-related technology exports and certain oil industry exports to Russia.
Russia denies that its forces are backing the rebels, instead accusing Ukrainian forces of aggression and deliberately firing at civilians.
Several European leaders at the summit condemned Russia's actions and expressed support for further sanctions if necessary.
Angel Merkel says EU leaders are united in avoiding a military solution to the Ukrainian crisis
But Finnish Prime Minister Alexander Stubb said the "jury is still out" on whether sanctions had worked, adding: "We need to find a ceasefire, a peace plan."
Federica Mogherini, named on Saturday as the EU's future foreign policy chief, said there could be no military solution to the crisis and that while sanctions were being worked on, the diplomatic process would need to continue.
Government forces have lost ground in recent fighting to pro-Russian rebels.
Western and Ukrainian officials say this offensive has been substantially helped by Russian regular troops, opening a new front. Russia denies the accusation. bbc
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