Tensions build in Ukraine over whether Russian army will step in

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DONETSK, Ukraine -- The steadily advancing Ukrainian army is setting its sights on the largest rebel-held city in eastern Ukraine, while Western officials on Wednesday warned that a Russian military buildup on Ukraine's border could herald a major incursion to protect the separatists.

President Vladimir Putin has resisted mounting pressure from Russian nationalists to send the army in to back the mutiny in eastern Ukraine. Even though the U.S. and NATO would be unlikely to respond militarily, the West would be certain to impose major sanctions that would put the shaky Russian economy on its knees -- and could quickly erode Putin's power.

Russia already is showing signs of economic dismay from sanctions imposed earlier this year, and U.S. President Barack Obama on Wednesday said U.S. sanctions against Russia are straining the country's economy.

But Putin on Wednesday showed Moscow aims to fight back, calling on government agencies to develop a list of agricultural imports from sanctions-imposing countries that could be banned for up to a year.

The state news agency RIA Novosti later quoted an official from Russia's plant and veterinary oversight service as saying all U.S. agricultural products would fall under the ban.

"When you see the buildup of Russian troops and the sophistication of those troops, the training of those troops, the heavy military equipment that's being put along that border, of course it's a reality. It's a threat, it's a possibility -- absolutely," U.S. Defence Secretary Chuck Hagel said Wednesday. U.S. and NATO officials say there are now about 20,000 Russian troops massed just east of Ukraine.

Pro-Russian separatists in eastern Ukraine have been fighting the Kyiv government since April. Ukraine and Western countries have accused Moscow of backing the mutiny with weapons and soldiers, a claim the Russian government has repeatedly denied.

The West has also accused Russia of most likely providing the insurgents with surface-to-air missiles that may have been used to shoot down a Malaysia Airlines passenger jet over rebel-held territory on July 17, killing all 298 people on board. The prime minister of The Netherlands, whose nationals made up more than half of the victims, said Wednesday that the search for victims' remains is being halted because fighting in the area of the crash site makes it too dangerous to continue.

Polish Prime Minister Donald Tusk said he believed "the threat of a direct intervention (by Russia) is definitely greater than it was a few days ago, or two weeks ago."

A U.S. official told the Associated Press that U.S. intelligence shows Russian forces continue to shell Ukrainian positions from inside Russian territory and send heavy weaponry - including artillery, armoured vehicles and air defence equipment - from a separatist training facility in southwest Russia. The official was speaking on condition of anonymity because he wasn't authorized to discuss intelligence matters publicly.

Adding to the concern is Russia's proposal in recent days for a humanitarian mission to eastern Ukraine.

"We share the concern that Russia could use the pretext of a humanitarian or peacekeeping mission to send troops into eastern Ukraine," NATO spokeswoman Oana Lungescu said in an emailed statement.

The Ukrainian Foreign Ministry said NATO Secretary-General Anders Fogh Rasmussen will visit Kyiv on Thursday to meet President Petro Poroshenko and other officials.

Humanitarian concerns are rising as Ukrainian forces come closer to encircling the city of Donetsk and continue their fight against the pro-Russia rebels in the large city of Luhansk.

Moscow has pushed for a cease-fire in the east, but the Ukrainian government has appeared bent on riding the momentum of a series of recent military advances to crush the rebels.

On Wednesday, Putin ordered government agencies to draw up a list of food and agricultural products to be banned. The order indicated that Russia has no inclination to back down over Ukraine, but could show it is trying to force a resolution to the conflict by non-military means.

While an overt military move into Ukraine would be deeply risky for Russia, Putin also faces agitation from nationalists who want Russia to take more assertive action.

Aleksandr Dugin, a prominent nationalist ideologue, wrote on his Facebook page this week that Luhansk faces a siege like that of Leningrad in WWII -- an analogy resonating in the heart of patriotic fervour. The nearly 900-day siege by the Nazis is one of Russia's major touchstones of suffering and valour.

"Luhansk has to be saved urgently, otherwise it will be the same baseness as the military aid that wasn't shown" earlier when nationalists were calling for Russia to intervene, he wrote.

In the Kalininsky neighbourhood only 5 kilometres (3 miles) east of Donetsk's central square, rebels and civilians were milling around outside after a night of what many said they believed were Ukrainian air strikes. There were eight craters at the scene that appeared to be the result of aerial bombing.

In another rebel stronghold, the city of Horlivka about 35 kilometres (22 miles) north of Donetsk, the city council said in Wednesday's statement that 33 civilians have been killed and 129 wounded by shelling over the past few days. The claim couldn't be independently verified.

As the Ukrainian military intensified its campaign against the rebels, heavily populated areas have increasingly come under attack. Kyiv adamantly denies launching artillery barrage and air raids against residential neighbourhoods and accuses the rebels of firing at civilian areas. The government has offered little evidence to prove its claims, which Human Rights Watch and others have questioned.

Ukrainian security spokesman Andriy Lysenko categorically denied Wednesday that Ukrainian airplanes have carried out airstrikes on Donetsk, Luhansk or other cities and residential areas.

Alexander Pivko, an emergency worker at the scene, didn't believe it.

"It was an aerial attack, and two warehouse workers were injured," he said, adding that no one in the neighbourhood had been killed.

The only buildings damaged in this industrial neighbourhood were a warehouse, a boiler room and an auto repair shop. But one crater from an explosion was only 10 metres (30 feet) away from a nearby residential building.

"I ran with my two children to hide in the basement after the first strike," said Marina Sibekina, a 30-year-old teacher. "A plane was in the air and in about five minutes a second explosion rang out."

"The rebels built a base here, but we're the ones who suffer," she said.

Soviet-era weapons in the Ukrainian military arsenals lack precision, making collateral damage in urban warfare inevitable.

The Ukrainian government has moved in swiftly on the rebel forces, ousting them from smaller towns in the region and tightening their grip on the regional capital cities of Donetsk and Luhansk.

Until recently, Donetsk saw little fighting other than a rebel attempt in May to seize the airport. But the city has come under more shelling in recent weeks, and local authorities estimate that around 200,000 people in the city of 1 million have left.

The U.N. has estimated that more than 1,100 civilians have died in the conflict since April.

As the rebels struggle to push back Kyiv's forces, fears of Russian intervention have grown.

Russia has denied any buildup on the border.

Peter Leonard in Kyiv, Ukraine, Jim Heintz and Vladimir Isachenkov in Moscow, Raf Casert in Brussels, Lolita C. Baldor in Stuttgart, Germany, and Ken Dilanian in Washington contributed to this report