Vyacheslav Ponomaryov's comments offer hope that the monitors - four Germans, one Dane, one Pole and one Czech - could soon see freedom. Including the observers from the Organization for Security and Co-operation in Europe (OSCE), separatists hold about 40 hostages in total.

"There has been good progress and a good productive dialogue," Ponomaryov, the self-styled mayor of the flashpoint city of Slovyansk, told reporters on Tuesday.

OSCE head Lamberto Zannier held emergency talks Tuesday in Kyiv with the US ambassador to Ukraine and the country's interim foreign minister. The minister, Andriy Deshchytsia, demanded the "immediate release" of the men, whose detention sparked international outrage and raised the stakes in Ukraine's separatist standoff. The US ambassador, Geoffrey Pyatt, called for the men's release "without conditions."

Earlier Tuesday, Ponomaryov appeared to use the hostages as a bargaining chip in order to get new US and EU sanctions lifted on some leaders of his movement. Separatists had also previously said they would only release the observers as part of a prisoner exchange with the interim government.

More recently, however, the separatists have taken to calling their hostages "guests." As a "goodwill gesture," they released one of the men on Sunday, a Swede who has diabetes.

'Every single inch'

On Tuesday, separatists entered the unguarded regional administration building in Luhansk, a city of about 450,000 people just 25 kilometers (15 miles) west of the border with Russia. They pulled down the Ukrainian flag, replaced it with Russia's tricolor and opened the building's doors to a waiting crowd.

The move further raises tensions in the east, where separatists have seized city halls, police stations and other government buildings in at least 10 cities and towns. The demonstrators seek - at the very least - a referendum on granting greater authority to Ukraine's regions. The interim government has resisted those demands so far, fearing they could lead to a breakup of the country or mean that Russia annexes even more Ukrainian territory - as it already has with Crimea.

On Tuesday, US Secretary of State John Kerry warned Russia against interfering in Ukraine any more than it already had. Kerry said Russia's actions show the necessity of an organization such as NATO.

Kerry said that Russia seeks to "change the security landscape of Eastern Europe, and called on the country "to leave Ukraine in peace."

"NATO territory is inviolable," Kerry said, adding that "we will defend every single inch of it."

mkg/jr (Reuters, AFP, AP)