Russian President Vladimir Putin called on pro-Moscow separatists in Ukraine Friday to open a "humanitarian corridor" to allow besieged Ukrainian troops to retreat.

"I call on the rebel forces to open a humanitarian corridor for the Ukrainian troops who are surrounded, so as to avoid unnecessary casualties and to give them the opportunity to withdraw from the zone of operations," Putin said in a statement issued after midnight Thursday.

Encircled Ukrainian fighters have been engaged in a desperate fight for survival in the town Ilovaysk for over a week as pro-Russian rebels, which had been on the retreat, staged a swift counter-offensive.

Putin addressed the separatists directly as defenders of "Novorossiya", or New Russia, a term first attributed to the tsars as they sought to expand their holdings.

He praised them for achieving considerable successes in cutting off Kiev's military operation which posed a deadly threat to the population of Donbas" region in eastern Ukraine where most of the fighting has occurred.

Kiev and the West have accused Russian troops of being behind a lightning counter-offensive that has seen pro-Moscow rebels seize swathes of territory from Ukrainian government forces, dramatically turning the tide in the four-month conflict.

Putin called on Kiev to "immediately halt military action, cease fire, sit down at the negotiating table and speak with representatives of the Donbass, and solve all of the problems which have built up exclusively by peaceful means".

The Russian president called on the rebels to provide wounded Ukrainian soldiers with medical help and said Russia is "ready and will provide humanitarian aid to the people of the Donbas who are suffering from this humanitarian catastrophe".

Russia last week sent into eastern Ukraine a convoy of more than 200 lorries which it said was carrying over 1,800 tonnes of aid without the permission of Kiev and without Red Cross monitors.

The unilateral move was condemned by Kiev and the West, who were concerned an inadvertant attack on the official convoy might serve as pretext for Russia to send in troops.

The spread of fighting and staggering counter-offensive by rebel troops this week led Kiev and the West to accuse Moscow on Thursday of having its troops actively involved in the fighting tearing apart the east of the country.