ODESSA/SLAVIANSK, Ukraine (Reuters) - At least 42 people were killed in street battles between supporters and opponents of Russia in southern Ukraine that ended with pro-Russian protesters trapped in a flaming building, bringing the country closer to war.
Pro-Russian rebels in the east freed seven European military observers on Saturday after holding them hostage for eight days, while Kiev pressed on with a military campaign to reclaim rebel-held territory in the area.
The riot in the Black Sea port of Odessa that ended in a deadly blaze in a trade union building was by far the worst incident in Ukraine since a February uprising that ended with a pro-Russian president fleeing the country.
It also spread the violence from the eastern separatist heartland to an area far from the Russian frontier, raising the prospect of unrest sweeping more broadly across a country of around 45 million people the size of France.
On Saturday morning, people placed flowers near the burnt-out doors of the trade union building, lighting candles and putting up the yellow, white and red flag of the city. The burnt remains of a tented camp of pro-Russian demonstrators nearby had been swept away. People spoke of their horror at what happened.
At the nearby hospital, residents queued up to offer blood and others went to find out what medicine was needed so they could go out to buy it.
Oleg Konstantinov, a journalist covering the events for a local Internet site, said bullets had flown in the melee before the blaze: "I was hit in the arm, then I started crawling, and then got hit in the back and leg."
The Kremlin, which has massed tens of thousands of soldiers on the eastern Ukrainian frontier and proclaims the right to invade to protect Russian speakers, said the provisional government in Kiev and its Western backers were responsible.
The Odessa bloodshed came on the same day as the biggest push yet by the government in Kiev to reassert its control over separatist areas in the east, hundreds of kilometers away, where heavily armed pro-Russian rebels have proclaimed a "People's Republic of Donetsk".
The rebels there aim to hold a referendum on May 11 on secession from Ukraine, similar to one staged in March in Ukraine's Crimea region, which was seized and annexed by Russia in a move that overturned the post-Cold War diplomatic order.
Rebels in the eastern town of Slaviansk, their most heavily fortified redoubt, shot down two Ukrainian helicopters on Friday, killing two crew, and stalled an advance by Ukrainian troops in armored vehicles. On Saturday the government said it was pressing on with the offensive in the area for a second day.
"We are not stopping," Interior Minister Arsen Avakov said in a post on Facebook. Ukrainian forces had seized control of a television tower in Kramatorsk, near Slaviansk, he said. "The active phase of the operation continued at dawn."
Overnight, Russian media reported fighting near Kramatorsk, citing hospital sources as saying one person had been killed and nine wounded. Separatists said three fighters and two civilians were killed in the Ukrainian advance on the town.
The military operation in the east was overshadowed by the violence in Odessa, a vibrant multi-ethnic port city that has seen some support for separatists but nothing like the riots that erupted on Friday.
Police said four people were killed, at least three shot dead, and dozens wounded in unprecedented running battles between people backing Kiev and pro-Russian activists. The clashes ended with separatists holed up in a the building that caught fire. Television footage showed petrol bombs exploding against its walls.
At least 37 people died in the blaze. On Saturday police raised the overall death toll in the city to 42. It was easily the biggest death toll since about 100 people were killed in Kiev protests that toppled pro-Russian President Viktor Yanukovich in February.
"Kiev and its Western sponsors are practically provoking the bloodshed and bear direct responsibility for it," RIA Novosti quoted Kremlin spokesman Dmitry Peskov as telling reporters.
Peskov also said Friday's violence made the idea of holding presidential elections in Ukraine on May 25 "absurd".
Regional police chief Petro Lutsiuk said on Saturday more than 130 people had been detained and could face charges ranging from participating in riots to premeditated murder.
The April 4 capture of the military monitors, on a mission from the Organization for Security and Cooperation in Europe, was a major diplomatic issue for the West and their release could help relieve pressure on Moscow.
The separatists initially described the monitors, led by a German colonel, as prisoners of war. One Swede was freed earlier on health grounds while four Germans, a Czech, a Dane and a Pole were still being held until Saturday. A Russian envoy helped negotiate their release.
The separatist leader in Slaviansk, self-proclaimed "people's mayor" Vyacheslav Ponomaryov, said they were freed along with five Ukrainian captives, with no conditions.
"As I promised them, we celebrated my birthday yesterday and they left. As I said, they were my guests."
Western countries blame Russia for stoking the separatism and fear Moscow could be planning to repeat its annexation of Crimea in other parts of Ukraine. Russia denies it has such plans, while saying it could intervene if necessary to protect Russian speakers, a new doctrine unveiled by President Vladimir Putin in March that overturned decades of post-Soviet diplomacy.
The West has made clear it will not use military force to protect Ukraine but will rely on economic sanctions against Moscow to, in the words of U.S. President Barack Obama, change Putin's "calculus".
So far Moscow has shrugged off sanctions, which so far have included measures only against individuals and small companies. Obama and Merkel said on Friday they would seek tougher measures, including hitting whole sectors of the Russian economy, if Moscow interferes with Ukraine's May 25 vote.