KIEV, Ukraine -- A day before a NATO summit, Russian President Vladimir Putin issued his own peace plan for eastern Ukraine, calling on the Russian-backed insurgents there to "stop advancing" and urging Ukraine to withdraw its troops from the region.
Hours earlier, Ukraine had issued a vague statement about agreeing with Putin on cease-fire steps. The separatists rejected the move, saying no cease-fire was possible without a pullback by Ukraine, while Putin's spokesman claimed that Moscow could not agree to a cease-fire because it was not a party to the conflict.
The back-and-forth came as President Barack Obama arrived in Estonia in a show of solidarity with NATO allies who fear they could be the next target of Russia's aggression. NATO is holding a summit in Wales on Thursday, with plans to approve a rapid-response team to counter the Russian threat.
Putin, for his part, is eager to avoid further international sanctions that could hurt his resource-based economy.
Amid the diplomatic chess match, a Ukrainian official said the bodies of 87 soldiers had been retrieved from southeastern Ukraine. Mykhailo Logvinov, a military official in Zaporizhye, was quoted by the Interfax news agency as saying the soldiers were killed near the eastern city of Ilovaysk, the scene of a horrific government defeat over the weekend. He said the remains were being identified by local forensic experts.
Putin, speaking in the Mongolian capital of Ulan Bator, said he came up with a 7-point peace plan on the plane trip there -- one in which Kiev must withdraw its troops and stop its artillery strikes.
"The warring parties should immediately coordinate and do the following things together," Putin said in televised comments. "The first thing is for the armed forces and insurgents of the south-east of Ukraine to stop active advancing in the Donetsk and Luhansk regions.
"Second is for the Ukrainian military to withdraw their troops at a safe distance that will make artillery and other strikes on populated areas impossible," he added.
Putin also urged an unconditional exchange of prisoners and said he expected a final agreement between Kiev and the rebels to be reached Friday at peace talks in Minsk, Belarus.
The Interfax news agency later carried positive remarks from top rebel commander Miroslav Rudenko, who said "there'll be no sense in a military solution to the conflict" if Kiev was to withdraw its troops.
Stock markets jumped on first reports of a possible cease-fire deal, but later eased back slightly. By early afternoon in Europe, Russia's MICEX benchmark was up 2.7 percent, while the ruble rose 1.4 percent against the U.S. dollar.
Germany's DAX index, which has been particularly sensitive to news regarding the Ukrainian crisis because of the country's economic ties with Russia, was up 1.2 percent.
Rebel leader said earlier this week that they would respect Ukraine's sovereignty in exchange for autonomy -- a shift from earlier calls for full independence or possible absorption into Russia. Putin has ignored their calls for annexation -- unlike in March, when Russia annexed Crimea.
Ukrainian President Petro Poroshenko has spoken in favor of devolving some of the central government's powers to the regions, but that is far short of autonomy for the rebellious east.
Obama said it was too early to tell what the announcements Wednesday from Ukraine and Russia meant. He noted previous unsuccessful cease-fire attempts and questioned whether the separatists would abide by a new cease-fire.
"We haven't seen a lot of follow-up on so-called announced cease-fires," Obama said. "Having said that, if in fact Russia is prepared to stop financing, arming, training, in many cases joining with Russian troops activities in Ukraine and is serious about a political settlement, that is something we all hope for."
Ukraine, NATO and the West have accused Russia of sending its troops and weapons to support the insurgents. Moscow has denied the charge. AP reporters on the ground have run into numerous Russian fighters among the rebels and have seen large convoys of heavy military equipment driving in eastern Ukraine from the direction of Russia.
Over the weekend, the European Union leaders agreed to prepare a new round of sanctions that could be enacted in a week, after NATO accused Russia of sending tanks and troops into southeastern Ukraine.
The fighting in eastern Ukraine has killed nearly 2,600 people and forced over 340,000 to flee their homes, according to the U.N.