WRAPUP 7-Ukraine wages counteroffensive against Russian forces in east

Ukrainian forces have launched a counteroffensive near the Russian-held town of Izium in eastern Ukraine, a regional governor said on Saturday, in what could prove a serious setback for Moscow's plans to capture the entire Donbas region.

Ukrainian forces have launched a counteroffensive near the Russian-held town of Izium in eastern Ukraine, a regional governor said on Saturday, in what could prove a serious setback for Moscow's plans to capture the entire Donbas region. Russian forces have focused much of their firepower on the Donbas in a "second phase" of their invasion that was announced on April 19, after they failed to reach the capital Kyiv from the north in the early weeks of the war.

But Ukraine has been retaking territory in its northeast, driving the Russians away from the second-largest Ukrainian city of Kharkiv. Keeping up pressure on Izium and Russian supply lines will make it harder for Moscow to encircle battle-hardened Ukrainian troops on the eastern front in the Donbas. Ukrainian President Volodymyr Zelenskiy also said complex talks were underway to find a way to evacuate a large number of wounded soldiers from a besieged steel works in the port of Mariupol in return for the release of Russian prisoners of war.

Mariupol, which has suffered the heaviest fighting in nearly three months of war, is now in Russian hands but hundreds of Ukrainian fighters are still holding out at the Azovstal steel works despite weeks of heavy Russian bombardment. Western military analysts say Russian President Vladimir Putin and his generals failed to anticipate such fierce Ukrainian resistance when they launched the invasion on Feb. 24.

As well as losing large numbers of men and much military equipment, Russia has been hit by economic sanctions. The Group of Seven leading Western economies pledged in a statement on Saturday to "further increase economic and political pressure on Russia" and to supply more weapons to Ukraine. Commenting on the latest developments in eastern Ukraine, regional governor Oleh Sinegubov said in comments aired on social media: "The hottest spot remains the Izium direction."

"Our armed forces have switched to a counteroffensive there. The enemy is retreating on some fronts and this is the result of the character of our armed forces," he said. DIPLOMATIC TREMORS

Moscow's invasion, which it calls a "special operation" to disarm Ukraine and protect it from fascists, has jolted European security. Kyiv and its Western allies say the fascism assertion is a baseless pretext for an unprovoked war of aggression. The war has prompted Finland to abandon its military neutrality and seek membership of NATO (North Atlantic Treaty Organization). Sweden is widely expected to follow suit.

Finnish President Sauli Niinisto told Putin by phone that his country, which shares a 1,300 km (800 mile) border with Russia, wanted to join NATO to bolster its own security. Putin told Niinisto it would be a mistake for Helsinki to abandon its neutrality, the Kremlin said, adding that the move could harm bilateral relations.

Turkish President Tayyip Erdogan said on Friday it was not possible for his country, a NATO member, to support enlarging the alliance because Finland and Sweden were "home to many terrorist organisations". The foreign ministers of Finland and Turkey were due to meet in Berlin later on Saturday to try to resolve their differences over NATO accession.

Erdogan's spokesman, Ibrahim Kalin, said on Saturday that Turkey had not shut the door to Sweden and Finland joining but wants negotiations with both countries and a clampdown on what it sees as terrorist activities in Europe. Kalin said the Kurdistan Workers Party (PKK) - designated a terrorist organisation by Turkey, the United States and the European Union - was fundraising and recruiting in Europe and its presence was "strong and open" in Sweden in particular.

"What needs to be done is clear: they have to stop allowing PKK outlets, activities, organisations, individuals and other types of presence to ... exist in those countries," Kalin said. G7 MINISTERS BACK MORE AID

One of the aims of Russia's action in Ukraine was to prevent the former Soviet republic ever joining NATO. German Chancellor Olaf Scholz, who spoke to Putin by phone on Friday, said he detected no sign of any change in the Russian leader's thinking on the conflict.

In an interview for the t-online news website published on Saturday, Scholz said Western sanctions on Russia would remain in place until it reached an agreement with Ukraine, adding: "Our aim is for this invasion to fail." Meeting in Germany, foreign ministers from the G7 group of rich nations backed giving Ukraine more aid and arms.

In their statement, the G7 ministers - from the United States, Japan, Germany, Britain, France, Italy and Canada - also pledged to "expedite our efforts to reduce and end reliance on Russian energy supplies". Russian Foreign Minister Sergei Lavrov said the West's sanctions amounted to a "total hybrid war" against Moscow but Russia would withstand sanctions by forging deeper partnerships with China, India and others.

As Russian and Ukrainian forces fought artillery duels on Saturday close to their shared border north of Kharkiv, Vera Kosolapenko, 67, wept as she stood in the still-smouldering ruins of her small home, struck by a Russian missile on Friday. "I don't know how I will rebuild this house," she said as explosions echoed over her leafy village of Bezruky.

"I loved this place." Ukraine's Zelenskiy said complex negotiations were under way on the next phase of the evacuation mission from the Azovtal steel works in Mariupol, with international intermediaries involved in the talks.

Erdogan's spokesman said Turkey had two weeks ago proposed carrying out a maritime evacuation of wounded fighters from the plant. The proposal remains "on the table" although Moscow has not agreed to it, he said. Russia's defence ministry said its forces had hit Ukrainian command posts, ammunition depots and other military equipment in several regions, including the Donbas, killing at least 100 Ukrainian "nationalists".

Reuters could not independently verify the report. (Additional reporting by Natalia Zinets, Tom Balmforth, Idrees Ali, David Ljunggren and Reuters bureaux; Writing by Gareth Jones and Timothy Heritage; Editing by William Mallard, David Clarke and Daniel Wallis)

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