Ukrainian military forces fought several battles with pro-Russian militias in several towns in Eastern Ukraine, resulting in 5 dead rebels and a stern warning from Vladimir Putin.

Reuters:

Ukrainian forces killed up to five pro-Moscow separatists in the east of the country, the Interior Ministry said on Thursday, as Russian President Vladimir Putin warned of "consequences" if Kiev used the army against its own people.

Interior Ministry forces backed by the army removed three checkpoints manned by armed groups in the separatist-controlled town of Slaviansk, the ministry said in a statement.

"During the armed clash up to five terrorists were eliminated," it said, adding that one person had been wounded on the side of government forces.

Under an international accord signed in Geneva last week, illegal armed groups, including the rebels occupying about a dozen public buildings in the largely Russian-speaking east, are supposed to disarm and go home.

However, the Kremlin, which has deployed tens of thousands of troops on Ukraine's border, maintains it has the right to protect Russian-speakers if they come under threat, a reason it gave for annexing the Crimean peninsula from Ukraine last month.

In St Petersburg, Putin said that if the authorities in Kiev had used the army in eastern Ukraine, this would be a very serious crime against its own people.

"It is just a punitive operation and it will of course incur consequences for the people making these decisions, including (an effect) on our interstate relations," Putin said in a televised meeting with regional media.

The Geneva agreement, signed by Russia, the United States, Ukraine and the European Union, is already in trouble as Kiev launches its offensive to regain control of the east.

East and West have put the onus on each other to ensure the accord is implemented on the ground. U.S. President Barack Obama said earlier he was poised to impose new sanctions on Moscow if it did not act fast to end the armed stand-off.

Moscow also flexed its economic muscles in its worst stand-off with the West since the Cold War, with the government suggesting foreign firms which pull out of the country may not be able to get back in, and a source at Gazprom saying the gas exporter had slapped an additional $11.4 billion bill on Kiev.

It's getting more difficult to see how this ends well for Ukraine. The rebels - at least marginally controlled from Moscow - have no intention of quitting their positions occupying government buildings. It looks more and more like they are a tripwire for war - that there is a point where casualties among the rebels will give Putin his excuse to invade.

The Ukrainian government is showing a lot of restraint but any move they make to dislodge the separatists that results in casualties risks Putin's faux wrath. It may be that a countdown clock in Moscow has already started and it's just a matter of time before the tanks roll across the border.