President Vladimir Putin today told pro-Russian rebels fighting in east Ukraine to halt plans for independence referendums and said his troops had been withdrawn from the border, a potential breakthrough in the worst showdown between Moscow and the West since the Cold War.
The Russian leader also hailed a planned May 25 presidential election in Ukraine, previously criticised by the Kremlin, as a "move in the right direction".
The softer tone of the surprise comments -- delivered during a meeting in Moscow with the visiting head of the OSCE -- suggested a potential resolution of the geopolitical confrontation and on-the-ground conflict in Ukraine that had been building towards war.
Russia's stockmarket immediately soared over three percent, and the battered ruble jumped to a five-week high against the dollar.
Putin's words came as fighting raged in east and southeast Ukraine, where troops were steadily pushing back pro-Russian rebels who have seized more than a dozen towns in a stepped-up offensive.
The United States and Europe were also preparing sanctions to hammer whole swathes of the Russian economy, which is teetering on recession, if the Ukraine presidential poll was scuppered.
Putin said of the estimated 40,000 troops he had ordered to Ukraine's border two months ago: "We have pulled them back. Today they are not at the Ukrainian border but in places of regular exercises, at training grounds."
He told the pro-Russian separatists "to postpone the referendums planned for May 11 in order to create the conditions necessary for dialogue".
Putin made the declarations after speaking with Swiss President Didier Burkhalter, current chief of the Organisation for Security and Cooperation in Europe.
The insurgents in east Ukraine -- which the West sees as controlled by Moscow despite Russian denials -- had been planning two referendums Sunday to proclaim independent republics centred on the cities of Donetsk and Lugansk.
Western governments have been increasingly warning of "war" over the worsening violence, and thrown their full weight behind the presidential election called by Kiev's interim leaders as crucial step to political stability.
British Foreign Secretary William Hague said in Kiev after meeting Ukraine's leaders that Russia had deployed covert fighters and "enormous propaganda" as part of "unacceptable pressure" to block the poll.
