MOSCOW -- Russia's President Vladimir Putin on Friday called on pro-Russian separatists to release Ukrainian soldiers who have been surrounded by the rebels in eastern Ukraine.
Putin's statement came several hours after Ukraine accused Russia of entering its territory with tanks, artillery and troops, and Western powers accused Moscow of lying about its role and dangerously escalating the conflict.
NATO said at least 1,000 Russian troops are in Ukraine and later released what it said were satellite photos of Russian self-propelled artillery units moving last week.
Russian Foreign Minister Sergey Lavrov dismissed the accusations of an invasion in a televised news conference on Friday, saying that Moscow "has not been presented with any facts" proving that it had happened.
For the second day, Russian markets reacted nervously to the escalation of the conflict in Ukraine with the Russian ruble diving to the all-time low of 37.10 rubles against the U.S. dollar in early morning trading, but recovered later to 36.90 rubles.
Markets dropped on Thursday on reports of Russia's apparent invasion in Ukraine, sparking investors' fears of further economic sanctions directed at Moscow. The ruble lost 1.4 percent against the dollar and the MICEX benchmark shed 1.6 percent.
"I'm calling on insurgents to open a humanitarian corridor for Ukrainian troops who were surrounded in order to avoid senseless deaths," Putin said in the statement published on the Kremlin's website in the early hours on Friday.
Putin did not address the claims about Russia's military presence in Ukraine. Instead, he lauded the pro-Russian separatists for "undermining Kiev's military operation which threatened lives of the residents of Donbass and has already led to a colossal death toll among civilians."
Putin's statement could be referring to Ukrainian troops who have been trapped outside the strategic town of Ilovaysk, east of Donetsk, for nearly a week now. Protesters rallied outside the Ukrainian General Staff on Thursday, demanding reinforcements and heavy weaponry for the troops outside Ilovaysk, most of whom are volunteers.
A top rebel leader in the rebel stronghold of Donetsk promptly reacted to Putin's appeal but said the Ukrainian troops would have to lay down the arms before they were allowed to go.
"With all our respect to Vladimir Vladimirovich Putin, the president of a country which gives us moral support, we are ready to open humanitarian corridors to the Ukrainian troops who were surrounded with the condition that they surrender heavy weaponry and ammunition so that this weaponry and ammunition will not be used against us in future," Alexander Zakharchenko said on Russia's state Rossiya 24 television.
The U.N. human rights office on Friday accused both sides of deliberately targeting civilians.
Pro-Russian rebels in Ukraine have carried out murders, torture and abductions along with other serious human rights abuses and violations of international humanitarian law, according to the mission's field work between July 16 and Aug. 17. The report also said Ukraine's military is guilty of human rights violations such as arbitrary detentions, disappearances and torture.
U.N. Assistant Secretary-General for Human Rights Ivan Simonovic, who visited Kiev on Friday, said the death toll had reached nearly 2,600 by Aug. 27, and described the humanitarian situation in eastern Ukraine as "alarming."
Simonovic condemned rebels for preventing people from leaving cities caught up in the fighting. He also pointed to reports of violations by volunteer battalions under government control.
In a talk Friday afternoon, Putin compared Ukrainian troops firing at civilians and surrounding cities in eastern Ukraine to Nazi invaders who laid siege to the Soviet siege of Leningrad in 1941-1944. He said residents of Ukraine's east were "suppressed with force" because they disagreed with what he called a coup in Kiev in February.
To stop the bloodshed, the Kiev government should open talks with the rebels who took up arms in defense, he said.
Two columns of tanks and other equipment entered southeastern Ukraine at midday on Thursday, following heavy shelling of the area from Russia that forced overmatched Ukrainian border guards to flee, according to Col. Andriy Lysenko, a spokesman for Ukraine's national security council.
European Union foreign ministers met in Milan Friday to weigh the 28-nation bloc's stance amid increasing calls to beef up economic sanctions against Russia. Their discussion was expected to prepare possible further steps to be announced at a summit of the bloc's leaders Saturday in Brussels.
U.S. President Barack Obama spoke Thursday with German Chancellor Angela Merkel, who has been a key power broker between the West and Russia, and they agreed Russia must face consequences for its actions.
Obama said Russia's activity in Ukraine would incur "more costs and consequences," though these seemed to be limited to economic pressure that will be discussed when Obama meets with European leaders at a NATO summit in Wales next week.
In a phone conversation with Ukraine's President Petro Poroshenko late Thursday, Merkel assured the Ukrainian leader of her support for "decisive actions" that could be taken Saturday, Poroshenko's press office said.
In Donetsk, the largest city under rebel control, the mayor's office reported sustained shelling across town on Friday morning. No casualties were immediately reported.
Jim Heintz contributed to this report from Kiev, Ukraine.