Ukraine Suffers Heavy Losses in Counterattack by Pro-Russia Rebels

Separatists Still Pose Significant Threat; Ukrainian Officials Begin Inspecting Humanitarian-Aid Trucks From Russia

MOSCOW—Ukraine suffered heavy losses in a counterattack along a key supply route to the separatist capital of Donetsk, officials said Thursday, underscoring the significant threat posed by pro-Russia rebel fighters despite steady advances by government forces.

Losses have mounted recently, adding more pressure on Kiev to seek a compromise at peace talks next week in the Belarusian capital of Minsk, where Ukrainian President Petro Poroshenko and Russian leader Vladimir Putin are scheduled to meet face-to-face for the first time in two months.

"Ukraine is seeking peace," Mr. Poroshenko said of the planned meeting on a visit to the eastern town of Mykolayiv on Thursday. "The whole world is tired of war."

Officials say Mr. Poroshenko hopes to get backing for his peace plan, which calls for rebels in eastern Ukraine putting down their weapons in return for possible amnesty and more autonomy for the country's regions. The insurgents say they have no intention of capitulating.

Russian Foreign Minister Sergei Lavrov spoke by telephone with his German counterpart Frank-Walter Steinmeier, discussing the need for a cease-fire and the start of a "national dialogue" in Ukraine, according to a Russian government statement.

Ukrainian officials also began inspecting the first trucks of what Russia says is a humanitarian convoy that has been stalled in diplomatic limbo for nearly a week. The Russian Foreign Ministry repeated its call for a cease-fire while the aid is delivered to civilians in the rebel-held city of Luhansk.

Analysts and diplomats say Russia's calls for an end to fighting look like an attempt to freeze the conflict on the ground to maintain Moscow's influence in Ukraine.

At the same time as his call for peace, however, Mr. Poroshenko signaled he was also ready to continue his army's four-month operation to oust rebels from several towns and cities. He visited a paratroop brigade Thursday, and said the army was preparing to bolster forces in the east by sending fresh units.

The fighting in the town of Ilovaisk left 19 fighters from pro-Kiev volunteer battalions dead and 42 wounded, senior Interior Ministry aide Anton Gerashchenko said Thursday, without giving a time frame. The government has been steadily eating away at rebel-controlled territory and had said it regained control of Ilovaisk, a town of some 18,000, on Wednesday.

Col. Andriy Lysenko, spokesman for Ukraine's National Security and Defense Council, said the government had repulsed the insurgent counterattacks and that reinforcements had arrived to help bolster the town's defenses. Separatist leaders, however, said they had surrounded Ukrainian units in the town and prevented reinforcements from getting there.

The losses in Ilovaisk "show how fierce the fighting is there," Mr. Gerashchenko wrote in a post on his Facebook FB -0.32% page. The four battalions fighting in Ilovaisk are from volunteer units, and Mr. Gerashchenko said they were acting effectively as army units, but without heavy weaponry.

Kiev forces have increasingly relied on the committed but poorly trained volunteer units in recent weeks. Mr. Gerashchenko wrote in his post Thursday that a problem in the operation was a lack of coordination with the army, which provides artillery support for operations.

The monthslong conflict has begun to weigh heavily on Ukraine's already weakened economy. On Thursday, Economy Minister Pavlo Sheremeta said he had submitted his resignation because he was unhappy with the pace of reforms and the government's appointment of a trade representative without his approval.

Mr. Sheremeta departed with a broadside at the government's attempts to overhaul its moribund economy, which is forecast to contract by more than 6% this year.

"We need to change this whole paradigm: The system, the people, the processes," Mr. Sheremeta said.

Prime Minister Arseniy Yatsenyuk, an economist who threatened to quit last month over the slow pace of reform, has warned that restoring infrastructure in eastern Ukraine could cost billions of dollars and that the conflict was hamstringing much-needed economic overhauls.

In Mykolayiv, Mr. Poroshenko indicated he would exercise his right to dissolve parliament next week, a move widely expected after the ruling coalition fell apart in July. That would trigger parliamentary elections in October, which would likely confirm voter backing for pro-Western parties, including Mr. Poroshenko's. But that schedule would also put pressure on the government to solve the crisis by then so that a vote could be safely held in the east.

Col. Lysenko on Thursday pointed to government progress in the battle for control of Luhansk. Over the weekend, Ukrainian forces took control of a district police station not far from the city, and on Wednesday, he said troops had taken control of "a significant part" of the city, without specifying what additional gains had been made.

The rebels deny that the government has made any serious advances into the city. On Thursday, Col. Lysenko said that fierce fighting continues to take place there and that soldiers working in small mobile groups were moving to take out rebel units and checkpoints.

Meanwhile, Ukrainian officials began inspecting some of the nearly 300 Russian trucks that Moscow says contain humanitarian aid. The International Committee of the Red Cross, which is observing the process, said the first trucks should head into Ukraine tomorrow and move on toward Luhansk.

The trucks have been parked in a field near the border for nearly a week, as Kiev voiced its concerns that the convoy could contain arms or be a prelude to a Russian invasion.

Wall Street Journal