KRAMATORSK/SLAVIANSK Reuters - Pro-Russian separatists hoisted the Russian flag on Ukrainian army armoured vehicles in eastern Ukraine on Wednesday, mocking the pro-Western Kiev government's attempt to reassert control on the eve of crucial talks in Geneva on the country's future.

Amid escalating rhetoric between Moscow and Kiev, the incident highlighted defiance by pro-Russian separatists, undermining central government efforts to push armed rebels out of captured buildings in 10 eastern towns without bloodshed.

Government troops had driven armoured personnel carriers flying the Ukrainian flag into the town of Kramatorsk in the early morning after securing control of a nearby airfield from the rebels on Tuesday, prompting Russian President Vladimir Putin to warn of the risk of civil war.

Several of the same vehicles later rumbled into Slaviansk, just 15 km (9 miles) away, with Russian and separatist flags and armed men in motley combat fatigues on top. They stopped outside the town hall, which is occupied by separatists.

As they drove in waving, some people waved back and shouted: "Well done lads!" and "Russia" Russia!"

A soldier guarding one of six troop carriers now under the control of the rebels told Reuters he was a member of Ukraine's 25th paratrooper division from Dnipropetrovsk.

"All the soldiers and the officers are here. We are all boys who won't shoot our own people," he said, adding that his men had had no food for four days until local residents fed them.

A spokesman for the separatists and a witness in Kramatorsk said the Ukrainian troops had given up their vehicles to the rebels after talks.

Overhead, a Ukrainian jet fighter carried out several minutes of aerobatics above the town's main square in a show of strength by Kiev's forces. A government official said the Ukrainian Defence Minister was travelling to Kramatorsk to try to clarify the situation.

The muscle-flexing and inflamed rhetoric heightened fears of violence after Moscow-backed gunmen occupied public buildings in 10 eastern towns and cities in the last week.

The Kiev government is seeking to reassert control slowly and without bloodshed before Thursday's Geneva meeting at which the Russian and Ukrainian foreign ministers are due to meet for the first time in the presence of the United States and the European Union.

Russia, which has refused to recognise Ukraine's pro-Western government since Moscow-backed President Viktor Yanukovich was ousted by mass protests in February, sought to dramatise instability in its neighbour ahead of those talks.

Brink of civil war

Putin told German Chancellor Angela Merkel in a telephone call late on Tuesday that Kiev had "embarked on an anti-constitutional course" by using the army against the rebels.

"The sharp escalation of the conflict puts the country, in effect, on the brink of civil war," a Kremlin statement quoted him as saying.

Ukrainian Prime Minister Arseny Yatseniuk reacted by accusing Moscow of "exporting terrorism to Ukraine".

Russian Foreign Minister Sergei Lavrov, speaking in Vietnam before heading to Geneva, said Kiev should listen to what he called the voice of the people of Ukraine and avoid force.

"It is unacceptable to use (the armed) forces in eastern Ukraine," he told reporters in Hanoi.

The Ukrainian government launched what it called a "special operation" on Tuesday against separatist militia in the Russian-speaking East, although aside from a landing by airborne troops the action was limited and avoided casualties.

Soldiers disembarked from two helicopters at the airfield 10 km (6 miles) from Kramatorsk, where reporters heard gunfire that seemed to prevent an air force plane from landing.

There was no sign of violence in the area on Wednesday, but civilians watching the armoured vehicles enter the town reflected the sharp political divisions in the mainly Russian-speaking southeastern Donbass region.

A group of about 30 local residents blocked the APCs briefly and tried to prevent them going through. Soldiers dismounted and pushed them away. One shot was fired in the air in a brief scuffle before the vehicles moved on.

The protesters managed to take away one hand-held radio and two rifle magazines from the soldiers.

"I think Donbass should be an independent country allied with Russia," said a local resident who gave his name as Olexander. "My homeland is the Soviet Union. We just need to chop off the rotten west of Ukraine and we’ll be fine."

In the main industrial city of Donetsk, at least 20 armed separatists occupied the city council building on Wednesday, a spokeswoman for the council said.

Crimean parallels

While troops were not deployed during the protests that ousted Yanukovich in Kiev, police snipers shot dead dozens of protesters.

The United States and the EU have accused Moscow of orchestrating the separatist operation in eastern Ukraine as it did in the Ukrainian Black Sea province of Crimea before annexing that region last month.

Ukraine's SBU state security service said in a statement Russian military intelligence was directing separatist action in the east.

"Intercepted conversations between Russian intelligence agents show that Russian military intelligence is openly directing diversionary actions in the east of Ukraine, giving cynical orders to open fire on Ukrainian soldiers," it said.

Moscow, which Western governments says has massed 40,000 troops just across the border with eastern Ukraine, denies it is playing a role. The Kremlin is demanding that Kiev accept a loose federal structure for Ukraine.

The Russian Foreign Ministry rebuked French Foreign Minister Laurent Fabius for saying in parliament that Moscow was clearly behind the rebellion and its objective was to prevent or discredit a planned May 25 presidential election.

"If the four-way meeting with Russia and Ukraine does not produce a result, we have to move to phase three of sanctions, which means economic sanctions. There is no other way," Fabius said.

So far, the EU and United States have imposed only visa bans and asset freezes on a limited number of individuals and firms, measures which Moscow has shrugged off. They have discussed adding more people to those lists and are also contemplating wider sanctions to hurt the Russian economy more broadly.

However, EU officials said preparations for curbs on trade, energy and financial ties with Moscow were still at an early stage and even an agreed expansion of the list of individual subject to visa bans and asset freezes would probably not come until next week at the earliest.

On Tuesday, acting Ukrainian President Oleksander Turchinov declared a much-needed victory over pro-Russian rebels by saying the Kramatorsk air base had been "liberated". But the government made no immediate attempt to dislodge separatists elsewhere.

Nonetheless, Kiev's stated resolve to challenge militants it says are orchestrated by the Kremlin, marked an escalation of the deepest East-West crisis since the Cold War.

A spokesman for U.S. President Barack Obama said Ukraine's government was obliged to respond to "provocations" in the east, but Washington was not considering sending arms to Kiev.