A pro-Russian insurgency leader in eastern Ukraine said on Saturday that foreign military observers detained as suspected Nato spies could be released in exchange for jailed pro-Russian activists.
Outside Slovyansk, a city some 90 miles west of Russia, Ukraine government forces continued operations to form a security cordon as it attempts to quell unrest threatening to derail planned elections on May 25.
Vyacheslav Ponomarev, self-proclaimed people's mayor of Slovyansk, described the detained observers as "captives" and said that they were officers from Nato member states.
"As we found maps on them containing information about the location of our checkpoints, we get the impression that they are officers carrying out a certain spying mission," Mr Ponomarev said.
The German-led, eight-member team was travelling under the auspices of the Organisation of Security and Cooperation in Europe (OSCE) when they were detained.
Germany's Defence Ministry said it had had lost contact with the team, which it said also included five Ukrainians.
Tim Guldimann, the OSCE's special envoy for Ukraine, told German public radio WDR on Saturday that "efforts are being made to solve this issue." He declined to elaborate.
German Foreign Minister Frank-Walter Steinmeier called Russian Foreign Minister Sergey Lavrov late ON Friday to press for the release of the observers.
A Russian embassy official was also called into the German Foreign Ministry to receive the same message.
In a statement released on Saturday, Russia's Foreign Ministry said it was taking "all measures to resolve the situation" but blamed the authorities in Kiev for failing to secure the safety of the team.
"The security of the inspectors is wholly entrusted to the host party," the statement said.
"Hence it would be logical to expect the current authorities in Kiev to resolve preliminary questions of the location, actions, and safety of the instructors."
The US and other nations in the Group of Seven said in a joint statement released on Friday night by the White House that they plan to impose additional economic sanctions on Russia in response to its actions in Ukraine.
The West has accused Russia of using covert forces to encourage unrest in Ukraine and says Moscow has done nothing to pressure pro-Russian militias to free police stations and government buildings in at least 10 cities across the region.
Condemning Russia's earlier annexation of the Ukrainian Black Sea region of Crimea, the G-7 said: "We will now follow through on the full legal and practical consequences of this illegal annexation, including but not limited to the economic, trade and financial areas."
An EU source said ambassadors from 28 European Union member states would meet Monday in Brussels to agree on a "list of 'Stage 2' sanctions" to add to the list of Russian officials and pro-Russian leaders in Ukraine who have already been sanctioned with EU asset freezes and travel bans.
The Russian Ministry of Defence denied claims, first raised by the US on Friday, that its aircraft had crossed the border with Ukraine, a spokesman told state news agencies on Saturday.
The streets of Slovyansk were relatively calm on Saturday.
Hundreds of mourners, including Mr Ponomarev, went to a local church to pay respects to a pro-Russian insurgent apparently killed during a clash with Ukrainian government troops earlier in the week. Gunmen stood guard around the perimeter of the church.
On one road leading west of the nearby town of Sviatohirsk, more than two dozen troops in black fatigues unloaded from the vehicles and stopped some drivers in the passing traffic, frisking passengers and inspecting vehicles for weapons.