Ukraine forces kill up to five rebels; Russia starts drill near border

By Aleksandar Vasovic and Alexei Anishchuk

SLAVIANSK, Ukraine/ST PETERSBURG, Russia (Reuters) - Ukrainian forces killed up to five pro-Moscow rebels on Thursday as they closed in on the separatists' military stronghold in the east, and Russia launched army drills near the border in response, raising fears its troops would invade.

The Ukrainian offensive amounts to the first time Kiev's troops have used lethal force to recapture territory from the fighters, who have seized swaths of eastern Ukraine since April 6 and proclaimed an independent "People's Republic of Donetsk."

Ukraine's acting president accused Moscow of supporting "terrorism at the state level" against his country for backing the rebels, whom the government blames for kidnapping and torturing a politician found dead on Saturday.

"The window to change course is closing," U.S. Secretary of State John Kerry warned in a hastily arranged appearance in the State Department, where he cited President Barack Obama's comments earlier on Thursday that Washington was ready to impose new sanctions if Moscow did not alter its policy.

In unusually blunt comments, Kerry accused Russia of using propaganda to hide what he said it was actually trying to do in eastern Ukraine - destabilize the region and undermine next month's planned Ukrainian presidential elections.

"So following today's threatening movement of Russian troops right up to Ukraine's border, let me be clear," Kerry said. "If Russia continues in this direction, it will not just be a grave mistake, it will be an expensive mistake."

Russian President Vladimir Putin said sanctions were "dishonorable" and destroyed the global economy but that so far the damage had not been critical.

The Ukrainian Interior Ministry said its forces backed by the army had removed three checkpoints manned by armed groups in the separatist-controlled city of Slaviansk.

"During the armed clash, up to five terrorists were eliminated," it said in a statement, adding one person had been wounded on the side of the government forces.

A rebel spokeswoman in Slaviansk said two fighters had died in a clash in the same area, northeast of the city centre. Slaviansk's separatist self-proclaimed mayor, Vyacheslav Ponomaryov, quoted on a local news site, said one man was shot dead and another badly wounded on the northeastern outskirts of the city. He said the dead had been unarmed.

The Kremlin, which says it has the right to invade its neighbor to protect Russian speakers, has built up forces on Ukraine's border - estimated by NATO at up to 40,000 troops.

Defence Minister Sergei Shoigu announced Moscow had launched military drills near the border in response to "Ukraine's military machine" and NATO exercises in Eastern Europe. Kiev demanded an explanation within 48 hours of action on the border.

Russia seized and annexed the Crimean peninsula from Ukraine last month after President Vladimir Putin overturned decades of post-Cold War diplomacy by announcing the right to use military force in neighboring countries.

An invasion of mainland Ukraine's industrial heartland would be a far more serious action. It had seemed beyond contemplation only weeks ago but now looks like a real threat, although the full extent of Putin's territorial ambitions remains a mystery.

In St Petersburg, Putin said that if the authorities in Kiev had used the army in eastern Ukraine, it would be a very serious crime against their own people.

"It is just a punitive operation and it will of course incur consequences for the people making these decisions, including (an effect) on our interstate relations," Putin said in a televised meeting with regional media.

U.S. Defence Secretary Chuck Hagel voiced concern about reports of Russian military activity, telling reporters during a visit to Mexico City: "This is dangerously destabilizing and it's very provocative."

Russia's Foreign Ministry responded that it was up to Washington to halt the Ukrainian military action, and "force the Kiev authorities, who are wards of the United States, to restrain themselves and not use force."

Reuters journalists saw a Ukrainian detachment with five armored personnel carriers take over a checkpoint on a road north of Slaviansk in the late morning after it was abandoned by separatists who set tires alight to cover their retreat.

But two hours later, the troops pulled back and it was unclear if Kiev would risk storming Slaviansk, a city of 130,000 that has become the military stronghold of a movement seeking annexation by Moscow of Ukraine's industrialized east.

'FINISH WHAT WE HAVE STARTED'

At another checkpoint set up by the Ukrainian military, a soldier said they were there to instill law and order.

"Those separatists, they violated the constitution, they are torturing the country, they violated laws, they do not recognize the authority of police, so the army had to move in and we will finish what we have started, so help me God," he said.

Under an accord signed by Russia, Ukraine, the United States and the European Union in Geneva last week, illegal armed groups are supposed to disarm and go home, including the rebels occupying about a dozen buildings in the largely Russian-speaking east.

Washington accuses Moscow of sending agents to coordinate the unrest in the east, as it did before seizing Crimea last month. Russia denies it is behind the uprising and says the separatists are responding spontaneously to hostility from Kiev. Russia made similar denials over Crimea until Putin acknowledged last week his troops had indeed acted alongside local militia.

"At the state level, Russia is supporting terrorism in our country," Ukraine's acting president, Oleksander Turchinov, said in an address to the country on Thursday. "Armed criminals have taken over buildings, are taking citizens, Ukrainian and foreign journalists, hostage and murdering Ukrainian patriots."

Turchinov called for the eastern offensive this week after the apparent torture and murder of a pro-Kiev town councilor whose body was found on Saturday near Slaviansk.

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Ukrainian soldiers stand guard at a checkpoint in the village of Malinivka, east of Slaviansk in eas …

Volodymyr Rybak had disappeared after being filmed trying to take down a separatist flag while attempting to enter the rebel-held town hall where he worked in Horlivka, near Slaviansk.

"He was bruised and punctured from head to toe ... it's clear they tortured him," said Aleksander Yaroshenko, a family friend who accompanied Rybak's widow when she identified his body at the morgue. "The police have lots of details, they have CCTV footage, they should know who did this," he told Reuters.

Rebels in Slaviansk released U.S. citizen Simon Ostrovsky, one of three journalists they were believed to be holding.

Moscow called for Kiev to release "political prisoners", including a pro-Russian activist named Pavel Gubarev.

U.S. TROOPS ARRIVE IN POLAND

So far, the United States and the EU have taken only mild action against Moscow, imposing visa bans and asset freezes on a few Russians, measures Moscow has scoffed at as meaningless. Washington and Brussels both say they are drafting more serious sanctions and will impose them if the Geneva deal collapses.

Even without serious sanctions, Russia's confrontation with the West has hurt its economy as fearful investors send their money abroad. Mutual funds specializing in Russia and Eastern Europe were the 30 worst performers out of 3,489 equity funds for sale in Britain in the three months ending in March.

But Moscow also flexed its economic muscles, with the government suggesting foreign firms that pull out of the country may not be able to get back in. A source at Gazprom said the Russian exporter had slapped an additional $11.4 billion bill on Kiev. Ukraine is negotiating to reverse east-west pipelines so that it can receive gas from Europe if Moscow cuts it off.

In NATO-member Poland, the first group of a contingent of about 600 U.S. soldiers arrived on Wednesday, part of an effort by Washington to reassure Eastern European allies who are worried by the Russian buildup near Ukraine's borders.

But NATO and the United States have made clear they will not use military force to protect Ukraine itself.

Shoigu, the Russian defence minister, said aircraft would fly increased patrols near the Ukrainian frontier as part of the new exercises. Two local residents in the area told Reuters they had seen attack helicopters flying in formation.

Kiev said the city hall in another eastern town, Mariupol, which had been seized, was back under central control. A separatist crowd later surrounded the building, patrolled by police but otherwise apparently empty.

Ukraine, a former Soviet republic, slid into unrest late last year when Moscow-backed President Viktor Yanukovich rejected a pact to build closer ties with Europe. Protesters took over central Kiev and he fled in February. Days later, Russian troops seized control of Crimea.

The Ukrainian Defence Ministry confirmed its involvement in the operation around Slaviansk on Thursday, saying the troops involved were airborne units with experience of such tasks from international peacekeeping missions.

Unarmed mediators from the Organization for Security and Cooperation in Europe are in eastern Ukraine trying to persuade pro-Russian gunmen to go home, in line with the Geneva accord.

Reuters reporters have not been able to establish that any Russian troops or special forces members are on the ground, although Kiev and Western powers say they have growing evidence that Moscow has a presence. Masked gunmen in the east, widely referred to as "green men", wear uniforms without insignia.

(Additional reporting by Alexander Reshetnikov and Gleb Garanich near Slaviansk, Alissa de Carbonnel in Donetsk, Pavel Polityuk, Natalia Zinets, Richard Balmforth and Alastair Macdonald in Kiev, Denis Dyomkin in Birobidzhan, Russia, Mark Felsenthal in Tokyo, Alessandra Prentice and Vladimir Soldatkin in Moscow, David Alexander in Mexico City, and Arshad Mohammed in Washington; Writing by Christian Lowe, David Stamp, Philippa Fletcher, Peter Graff and Peter Cooney; Editing by Mohammad Zargham)

• Politics & Government
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Israel suspends peace talks after Palestinian unity bid

By Jeffrey Heller

JERUSALEM (Reuters) - Israel on Thursday suspended U.S.-sponsored peace talks with the Palestinians in response to President Mahmoud Abbas's unexpected unity pact with the rival Islamist Hamas group.

The negotiations had appeared to be heading nowhere even before Wednesday's reconciliation agreement between the Palestinian groups plunged them deeper into crisis. The United States had been struggling to extend the talks beyond an original April 29 deadline for a peace accord.

"The government of Israel will not hold negotiations with a Palestinian government that is backed by Hamas, a terror organization that calls for Israel's destruction," an official statement said after a six-hour meeting of the security cabinet.

Asked to clarify whether that meant the talks were now frozen or would be called off only after a unity government was formed, a senior Israeli official said: "They are currently suspended."

In Washington, a U.S. official said the United States would have to reconsider its assistance to Abbas's aid-dependent Palestinian Authority if the Western-backed leader and Hamas formed a government.

U.S. Secretary of State John Kerry spoke by telephone with Abbas on Thursday and expressed his disappointment at the reconciliation announcement.

Kerry stressed that any Palestinian government must abide by the principles of nonviolence, recognition of the state of Israel, and acceptance of previous agreements and obligations, State Department spokeswoman Jen Psaki said.

Kerry, who has shuttled repeatedly to the Middle East to push peace efforts, said he was not giving up hope.

"There's always a way forward, but the leaders have to make the compromises necessary to do that," he told reporters.

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Israel's Prime Minister Benjamin Netanyahu attends the weekly cabinet meeting in Jerusalem, in t …

"We will never give up our hope or our commitment for the possibilities of peace. We believe it is the only way to go. But right now, obviously, it's at a very difficult point and the leaders themselves have to make decisions. It's up to them."

U.N. Middle East envoy Robert Serry offered support for the Palestinian agreement after meeting Abbas on Thursday, saying in a statement it was "the only way to reunite the West Bank and Gaza under one legitimate Palestinian Authority".

The deal envisions a unity government within five weeks and elections six months later. Palestinian divisions widened after Hamas, which won the last general ballot in 2006, seized the Gaza Strip from forces loyal to Abbas in 2007.

'DOOR WAS NOT CLOSED'

In an interview with MSNBC after the security cabinet meeting, Israeli Prime Minister Benjamin Netanyahu appeared to leave open a window for future talks if Abbas reversed course or reconciliation with Hamas, seen by the West as a terrorist group, fell through.

"I hope (Abbas) changes his mind," Netanyahu said. "I will be there in the future if we have a partner that is committed to peace. Right now we have a partner that has just joined another partner committed to our destruction. No-go."

Israeli chief negotiator Tzipi Livni said she hoped a way could be found to return to talks. "The door was not closed today," she told Israel's Channel 2 television.

Wasel Abu Yousef, a top Palestine Liberation Organization official, rejected what he called "Israeli and American threats" and said a unity government would be made up of technocrats.

But Netanyahu dismissed any notion that Hamas would not be the real power behind the bureaucrats.

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Senior Fatah official Azzam Al-Ahmed (L), head of the Hamas government Ismail Haniyeh (C) and senior …

The Israeli-Palestinian negotiations, championed by Kerry and aimed at ending decades of conflict and creating a Palestinian state in the occupied West Bank and Gaza Strip, began in July amid strong public skepticism in Israel and the Palestinian territories.

The two sides were also at odds over Israeli settlement construction in the West Bank and East Jerusalem, activity most countries deem illegal in areas captured in the 1967 Middle East war, and over Abbas's refusal to accept Netanyahu's demand he recognize Israel as a Jewish state.

For Netanyahu, Abbas's approach to Hamas offered an opportunity to withdraw from the negotiations with a reduced risk of a rift with the United States, Israel's main ally, which also refuses to deal with the Islamist militant group.

A suspension of the talks, while casting blame on the Palestinian reconciliation venture, is also likely to calm far-right allies in Netanyahu's governing coalition who oppose the creation of a Palestinian state and territorial compromise.

For Abbas, whose official mandate as president expired five years ago, an alliance with Hamas leading to a new election potentially strengthening his political legitimacy could outweigh the prospect of any international backlash.

Palestinians have also been angered by Israel's announcement during the negotiations of thousands of new settler housing units and what they say was its failure to tackle substantive issues such as the borders of a future state.

SANCTIONS

The next immediate steps stemming from the collapse of the talks seemed likely to be Israeli sanctions against the Palestinian Authority, which exercises limited self-rule in the West Bank.

"The sanctions will be measured. We will not cause the Palestinian Authority to collapse," Livni said on television.

Palestinian leaders have already made clear they would seek to further their bid for nationhood via unilateral moves to join various international bodies and United Nations agencies.

The biggest threat for Israel could come in the shape of the International Criminal Court, with the Palestinians confident they could prosecute Israel there for alleged war crimes tied to the occupation of lands seized in 1967.

"Israel will respond to unilateral Palestinian action with a series of measures," said the Israeli statement issued after the security cabinet meeting, without going into detail.

The talks had moved close to a breakdown this month when Israel refused to carry out the last of four waves of prisoner releases, demanding that Palestinians first commit to negotiating after the April deadline.

Abbas responded by signing 15 international treaties, including the Geneva Conventions on the conduct of war and occupations. Israel condemned the move as a unilateral step towards statehood.

Asked whether the reconciliation with Hamas would incur promised U.S. sanctions, PLO Deputy Secretary Yasser Abed Rabo told Palestinian radio it was too soon to penalize a government that had yet to be formed.

"There's no need for the Americans to get ahead of themselves over this. What happened in Gaza in the last two days is just a first step which we welcome and want to reinforce," he said.

"But this step shouldn't be exaggerated, that an agreement for reconciliation has been completely reached... We need to watch the behavior of Hamas on many details during the coming days and weeks on forming a government and other things."

(Additional reporting by Allyn Fisher-Ilan and Ari Rabinovitch in Jerusalem, Ali Sawafta and Noah Browning in Ramallah and Washington's Matt Spetalnick, Mark Felsenthal, Arshad Mohammed and David Brunnstrom; Editing by Angus MacSwan and Mohammad Zargham)

• Politics & Government
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Former U.S. test site sues nuclear nations for disarmament failure

By David Brunnstrom

WASHINGTON (Reuters) - The tiny Pacific republic of the Marshall Islands, scene of massive U.S. nuclear tests in the 1950s, sued the United States and eight other nuclear-armed nations on Thursday, accusing them of failing in their obligation to negotiate nuclear disarmament.

The Pacific country accused all nine nuclear-armed states of "flagrant violation of international law" for failing to pursue the negotiations required by the 1968 Nuclear Non-Proliferation Treaty.

It filed one suit specifically directed against the United States, in the Federal District Court in San Francisco, while others against all nine countries were lodged at the International Court of Justice in The Hague, capital of the Netherlands, a statement from an anti-nuclear group backing the suits said.

The action was supported by South African Nobel Prize winner Archbishop Desmond Tutu, the Nuclear Age Peace Foundation said.

"The failure of these nuclear-armed countries to uphold important commitments and respect the law makes the world a more dangerous place," its statement quoted Tutu as saying.

"We must ask why these leaders continue to break their promises and put their citizens and the world at risk of horrific devastation. This is one of the most fundamental moral and legal questions of our time."

U.S. State Department spokeswoman Jen Psaki declined to comment on the suits.

The Nuclear Age Peace Foundation is a U.S.-based non-partisan advocacy group working with the Marshall Islands and its international pro-bono legal team.

The Marshall Islands, a group of 31 atolls, was occupied by Allied forces in 1944 and put under U.S. administration in 1947.

Between 1946 and 1958, the United States conducted repeated tests of hydrogen and atomic bombs in the islands.

BIKINI ATOLL BLAST

One, on March 1, 1954, was the largest U.S. nuclear test, code-named Bravo. It involved the detonation of a 15-megaton hydrogen bomb on Bikini Atoll, producing an intense fireball followed by a 20-mile-high mushroom cloud and widespread radioactive fallout. The Marshallese government says the blast was 1,000 times more powerful than that at Hiroshima.

The lawsuits state that Article VI of the NPT requires states to negotiate "in good faith" on nuclear disarmament.

The Nuclear Age Peace Foundation said the five original nuclear weapons states - The United States, Russia, Britain, France and China - were all parties to the NPT, while the others - Israel, India, Pakistan and North Korea - were "bound by these nuclear disarmament provisions under customary international law."

A copy of the suit against the United States made available to Reuters says that it is not aimed at seeking compensation from the United States for the testing in the Marshall Islands, which became an independent republic in 1986.

Under agreements between the United States and the Marshall Islands, a Nuclear Claims Tribunal was established to assess and award damages to victims of the nuclear tests. But it has never had the cash to compensate fully for the damage done.

The suit against the United States said it should take "all steps necessary to comply with its obligations ... within one year of the date of this Judgment, including by calling for and convening negotiations for nuclear disarmament in all its aspects."

"Our people have suffered the catastrophic and irreparable damage of these weapons, and we vow to fight so that no one else on earth will ever again experience these atrocities," the statement quoted Marshall Islands Foreign Minister Tony de Brum as saying.

"The continued existence of nuclear weapons and the terrible risk they pose to the world threaten us all."

(Reporting by David Brunnstrom; Editing by Dan Grebler)

• Politics & Government
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Obama wraps up Japan visit after security pledge but no trade deal

By Antoni Slodkowski and Matt Spetalnick

TOKYO (Reuters) - U.S. President Barack Obama neared the end of a state visit to Japan on Friday during which he assured America's close ally that Washington would come to its defense but failed to clinch a trade deal vital to his promised "pivot" to Asia.

Failure to reach a trade deal has delayed a joint statement on security and economic ties that Obama and Prime Minister Shinzo Abe were expected to issue after their summit on Thursday. Japanese Foreign Minister Fumio Kishida told reporters the joint document was in the final stages of being worked out.

Obama and Abe had ordered their top aides to make a final push to reach a trade agreement but Economy Minister Akira Amari told reporters on Friday that gaps remained despite recent progress.

"This time we can't say there's a basic agreement," Amari told reporters after a second day of almost around-the-clock talks failed to settle differences over farm products and cars.

"Overall, the gaps are steadily narrowing," he said.

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U.S. President Barack Obama walks down a hallway before he bids farewell to Japan's Emperor Akih …

Tokyo had said the meeting was an "important juncture" for a bilateral deal, which would in turn be central to a delayed 12-nation Trans-Pacific Partnership (TPP) trade pact.

The TPP is high on Abe's economic reform agenda and central to Obama's policy of expanding the U.S. presence in Asia.

Obama, who ends his three-day Japan state visit early on Friday and heads for South Korea, assured Japan that Washington was committed to its defense, including over tiny isles at the heart of a row with China, but denied he had drawn any new "red line" and urged peaceful dialogue over the dispute.

Domestic media said Tokyo was keen to incorporate the comments - which drew a swift rebuke from China - into the broader joint statement between the allies.

China also claims sovereignty over the Japanese-controlled islands, known as the Senkaku in Japan and the Diaoyu in China.

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U.S. President Barack Obama (L) attends a news conference with Japanese Prime Minister Shinzo Abe at …

Obama confirmed at a news conference on Thursday the U.S. position that, while Washington takes no stance on the sovereignty of the East China Sea isles, they fall under the scope of a U.S.-Japan treaty that obligates America to defend its ally.

A U.S. official declined to comment on Japanese media reports that said U.S. negotiators had held the joint statement "hostage" in an effort to force Japan to make concessions on trade. But there was a sense of U.S. frustration building on Thursday over the inability to narrow gaps on trade.

Obama, at the start of a four-nation tour, has been treated to a display of pomp and ceremony meant to show that the U.S.-Japan alliance, the main pillar of America's security strategy in Asia, is solid at a time of rising tensions over growing Chinese assertiveness and North Korean nuclear threats.

The diplomatic challenge for Obama during his week-long, four-nation regional tour is to convince Asian partners that Washington is serious about its promised strategic pivot, while at the same time not harming U.S. ties with China, the world's second-biggest economy.

Beijing has painted the "pivot" as effort to contain the rising Asian power.

(Writing by Linda Sieg; Editing by Paul Tait)

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Empty spaces mark Korean school tribute for missing ferry victims

By Ju-min Park and James Pearson

ANSAN, South Korea/SEOUL (Reuters) - A floral tribute to the children who drowned in a sinking South Korean ferry features photographs of the victims in their school uniforms, while lines of empty spaces wait to be filled with photos once those still missing are confirmed dead.

The pictures, flowers and spaces are banked up the entire wall of a gymnasium near Danwon High School in Ansan, on the outskirts of Seoul.

"There are too many pictures, way more than I thought," said crying university student Jung Sun-a, 24. "And they are too young in these pictures. I really hope they can fulfill their dream in the next life. And I hope the missing kids will also come back to their parents as soon as possible."

One wailing old woman shouted out for her granddaughter, Lee Bomi.

"Bomi is still in darkness. She hasn't come home yet. What are we going to do? I came here to ask you. She is still in dark waters. What am I supposed to do?"

The Sewol ferry, weighing almost 7,000 tons, sank on a routine trip from the port of Incheon, near Seoul, to the southern holiday island of Jeju. Investigations are focused on human error and mechanical failure.

More than 300 people, most of them students and teachers from Danwon High School have died or are missing and presumed dead after the April 16 disaster.

The confirmed death toll on Friday was 181.

School classes resumed on Thursday in somber mood. In the classrooms of the missing, friends posted messages on desks, blackboards and windows, in the days after disaster struck, asking for the safe return of their friends.

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A woman attends a candlelight vigil in Ansan, to commemorate the victims of capsized passenger ship  …

One note was stuck to the window of an empty classroom in the days when hopes for finding the passengers alive were fading fast. It was addressed to a girl called Si-yeon.

"Si-yeon, It's me, your oppa (male friend). I miss you a lot. I am so worried. Please come out of that ferry. We ought to go and eat your favorite things, sweet potatoes, cheese and tangerines," it read.

"It must be really cold in there. I am so sorry that I cannot do anything for you. It makes me feel so frustrated - there is nothing else I can do but pray for you. I don't even want to imagine how scared you must be. I hope you are alive. I won't give up, I will wait for you. I want to tell you that I love you."

A professor who led a psychological counseling at the school said the children now distrusted adults who fought amongst themselves, did little to rescue the passengers and told them to stay put.

"That is an obstacle in our treatment," he told local radio. "Without dealing with the mistrust, it is hard to approach them to help cure them. Yet such distrust cannot be dealt with words only. Once betrayed, how do you expect them to believe us again?"

CREW MEMBERS ARRESTED

Captain Lee Joon-seok, 69, and other crew members who abandoned ship after telling the children to stay put in their cabins have been arrested on negligence charges. Lee was also charged with undertaking an "excessive change of course without slowing down".

One crew member said after a brief appearance in court on Thursday she and six colleagues had been "under command" to abandon ship. Another was asked if there was any discussion about trying to save the children.

"At that moment, we were on the third floor and except for the third floor situation, we weren't aware of anything else," the crew member said.

Prosecutors have raided the home of Yoo Byung-un, the head of a family that owns the Chonghaejin Marine Co. Ltd, the company that operated the Sewol. They seized another ferry run by the company and found that life rafts and escape chutes were not working properly.

"I'm not saying it automatically means Sewol's safety equipment was faulty, but it helps to deduce the state of maintenance," one investigator told Reuters.

Prosecutors said on Friday they had told Yoo's younger son, who is staying in New York, and daughter to return by Tuesday for investigation.

Along with his elder brother, Yoo Hyuk-kee, Yoo is the biggest shareholder of a holding company that owns Chonghaejin Marine and its other affiliates.

Prosecutors said they had found some data have been deleted from computers they confiscated in the raids and some computers had been replaced.

The Sewol, 146 meters (479 ft) long and 22 meters wide, was more than three times overloaded, according to official recommendations, with cargo poorly stowed and inadequate ballast.

Moon Ki-han, an executive at Uryeon (Union Transport Co.), the firm that supervised cargo loading, told Reuters there were 105 containers onboard, some of which toppled into the sea as the ship listed.

Forty-five were loaded on to the front deck and 60 into the lower decks, Moon said. In total, the ship was carrying 3,600 metric tons of cargo including containers, vehicles and other goods, he said.

A member of parliament this week said the Korean Register of Shipping recommended a load of 987 tons for the Sewol.

(Additional reporting by Jack Kim in Mokpo and Kim Miyoung and Cho Meeyoung in Seoul; Writing by Nick Macfie; Editing by Simon Cameron-Moore)

• Society & Culture
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Ukraine revolt shows faces, but whose are the brains?

By Alissa de Carbonnel and Aleksandar Vasovic

DONETSK/SLAVIANSK, Ukraine (Reuters) - One is a dapper former croupier and promoter of Ponzi scams run by "Russia's Bernie Madoff"; the other is a burly Soviet Navy veteran turned soap factory boss, with a shifting gaze and a glint of gold teeth.

In an uprising whose calling cards are the Kalashnikov and the black balaclava, Denis Pushilin and Vyacheslav Ponomaryov have become the unmasked faces of the pro-Russian separatist movement in eastern Ukraine that has plunged Moscow and the West into their most ominous confrontation since the Cold War.

But many in the Donetsk region, including officials who have negotiated with the activists, see the pair as mere fronts for brains behind the scenes: a "puppeteer" in the words of one local Ukrainian mediator; or Vladimir Putin in the eyes of Kiev, which says Russian special forces are orchestrating events.

Pushilin, a 32-year-old who won 77 votes when he ran for parliament a few months ago, emerged this month as leader of the self-styled People's Republic of Donetsk, occupying the regional governor's office in Ukraine's industrial heartland.

Well-pressed suits set him apart from his frumpy admirers and unwashed men in mismatched camouflage on the barricades, as he gives an articulate voice to widely held fears among Russian speakers; many despise the leaders in Kiev who overthrew Viktor Yanukovich, the Donetsk-born president, and want a vote on letting the industrial east follow Crimea into Russian hands.

"There will be a referendum," is his mantra to small crowds who gather to hear him speak from a stage protected by walls of sandbags and truck tires, topped with barbed wire.

'PEOPLE'S MAYOR'

Ponomaryov, "people's mayor" of Slaviansk, a rustbelt city of 130,000 a two-hour drive north of Donetsk, cuts an altogether different figure. Middle-aged, he is much less comfortable around the media, often addressing the ground, his eyes shielded by a baseball cap, occasionally flashing those gold teeth.

He is cagey about his Cold War military service and his business affairs, even his age, but shows greater authority over the gun-heavy separatists who have taken effective control of the entire city. Long feared by officialdom as a haven for crime gangs, Slaviansk looks like the military base camp for the pro-Russian political demands in other towns across the region.

Ponomaryov and Pushilin, who seem largely unacquainted with each other, deny taking orders from the Kremlin or liaising with Russian commandos, who the Ukrainian government and its U.S. and European allies suspect are active under cover, coordinating moves by locals to seize strategic objectives three weeks ago.

"There's not a single Russian soldier or an active member of Russian armed forces in the Slaviansk area, and no contact with Russian authorities, its state security services or military," Ponomaryov said - though he did broadcast an appeal to President Putin at the weekend asking for Russian troops to protect the city from "fascists" after three of his men died in a gunfight.

The mayor says his own military career ended in 1991 with the collapse of the Soviet Union. He had served in a "special operations unit" of the Arctic-based Northern Fleet. In civilian life, he said, he ran a factory "and then I had my own company".

"Now I own another company," he said. "It produces soap."

For a small businessman, he commands considerable respect among many of the armed men manning checkpoints around the city - some 2,500, he reckons - including men Ponomaryov calls "volunteers from Russia" and other former Soviet states.

Casually dressed in jeans, T-shirt and hoodie, reluctant to shake hands and missing two fingers - a sawmill accident, aides say - he growls at underlings in ripe, street language and moves between his bodyguards with a rolling, fighter's gait.

Though he is elusive about the wider command structure in the region, he said: "We are maintaining contacts at all levels, with all towns and cities in the Donetsk Republic."

MASKED MEN

Where Ponomaryov's authority seems less certain, however, is among the brisk, clearly professional soldiery concentrated at the headquarters of the SBU security service, men with better weapons and less of a line in chat for reporters or local kids.

It is these masked men, some sporting Cossack lambskin hats or unruly beards, who draw comparisons to the "little green men" who appeared in uniforms lacking insignia in Crimea last month - as if from Mars, if one believed Moscow's denials of involvement.

Monitors from Europe's OSCE security body say they see signs of a Russian troop presence - but have no concrete evidence.

In Donetsk, a city of a million going about its business untroubled by the makeshift camp in the regional government building, the environment is much less military.

Pushilin is no guerrilla commandante, though like Ponomaryov he also relates a personal journey to political action against the "Kiev junta" that he insists owes nothing to Moscow.

Born locally, he graduated in engineering. After military service, he drifted from security guard to casino croupier, ad man and candy salesman before promoting new financial products for famed fraudster Sergei Mavrodi - "the most honest man in the world", according to Pushilin. He ran for parliament for a party called MMM, a name notorious for the Ponzi pyramid schemes by which Mavrodi ruined thousands of Russian savers in the 1990s.

'PEOPLE'S SOVIET'

He won less than 0.1 percent of the vote but was inspired to offer his services as "people's mouthpiece" after pro-Russian militants seized the regional government offices on April 6.

He puts his rapid salesman's patter to use, holding court to reporters on the top floor of the Soviet-era tower and keeping fellow members of the "people's soviet" on-message - a roll of the eyes or a gesture silence those who stray from the script.

Democracy, he says, is the key. Pushing for a referendum on May 11 - though it is far from clear how any vote can be held - he says annexation by Russia is not a foregone conclusion: "The question will be sovereignty, 'yes or no," for Donetsk, he said.

"Afterwards we will decide what is best for us: staying with Ukraine, becoming part of Russia, or whatever."

An attempt to seize power in Donetsk in early March fizzled and a previous "people's governor" is now in jail - explaining, aides say, why Pushilin shares out some responsibilities.

Now, however, Ukraine's government seems paralyzed by the uncertain loyalties and poor resources of forces on the ground - and by fear that any casualties may provoke Russian to step in.

Nonetheless, Ponomaryov and Pushilin do not look like masters of their own destiny. Some observers say that, as in Crimea, those in the spotlight have been drawn from the obscure wings of an existing pro-Russian political camp to speak lines dictated by Moscow and, perhaps, by powerful local interests.

"They are well-known marginal forces ... that are now being used as functional figures to voice and represent the positions of the organizers of this separatist spectacle," said Volodymyr Kipen, a leading political analyst in Donetsk. "They have long been kept around to carry out the more radical work.

"But now they have new owners outside the country."

Many, he said, had links with Yanukovich's now fragmented Party of Regions, which had its power base in Donetsk and was long bankrolled by leading business figures, including Ukraine's richest man, the region's coal and steel tycoon Rinat Akhmetov.

'SOME KIND OF PUPPETEER'

Party of Regions official Alexei Granovsky, who has tried to negotiate with the overt separatist leaders for the regional council, said he did not believe they were not really in charge.

"There is some kind of puppeteer behind them - I don't know who," Granovsky said. "Someone is managing some of these people from outside ... They can't make decisions right away. They say, 'Let's go ask the people. We're only their mouthpiece.' It shows they can't make decisions. They need to check with someone."

He also had the impression that some kind of go-between was coordinating pro-Russian groups across the region: "The Donetsk People's Republic is not linked directly to Slaviansk.

"That's a whole different vector - the military wing."

Ukraine's SBU security service has named a lieutenant-colonel in Russia's GRU military intelligence agency, as well as a fugitive SBU officer who it says was a GRU spy, as having coordinated local militants in Crimea and now in Donetsk.

Pushilin, Ponoymaryov and others in smaller towns have yet to establish anything like the wider municipal authority seized by separatists in Crimea, though Slaviansk comes closest.

In Crimea, Sergei Aksyonov - "Goblin" to his associates - traded obscurity and control of the local wrestling association into a spotlight role on the Kremlin podium alongside Putin.

The arrest of reporters and suspected Ukrainian nationalists in Slaviansk; an anti-Semitic leaflet in Donetsk that forced Pushilin into strenuous denials of involvement; and, this week, the murder of a local councilor that Kiev is blaming on Russia and Ponomaryov's men, have all raised concerns about a repeat of lawlessness seen in Crimea. There, Ukrainian speakers have been leaving and ethnic Tatars have complained of discrimination.

Many question whether Russian can, or even wants to any time soon, take over eastern Ukraine. Polls show deep disillusion with Kiev - a combination of fears about Ukrainian nationalists and long-standing disillusion after 23 years of corruption and decline as an independent state. But barely a third of people in Donetsk region say they would vote for annexation by Moscow.

Putin's critics see him trying to hold Kiev hostage to unrest in the east, preventing it from shutting out Russia and locking itself into the Western bloc. Moscow says it is not interfering but concerned for the welfare of Russian-speakers.

Ponomaryov says he is in it for the long run, to defend his people against "fascists" he says seized power in Kiev: "We are on our home soil," he said. "We have given everyone a warning."

Pushilin talks of a golden future for the Donetsk Republic, rising from the pungent chaos of the occupied governor's office.

His last political manifesto called for abolishing interest on loans. Now, he says: "We are uniting for something, for the referendum, so we will build something big and bright."

(Additional reporting by Thomas Grove in Slaviansk; Writing by Alastair Macdonald; Editing by Giles Elgood)

• Politics & Government
• Military & Defense
• Ukraine
• Vladimir Putin
• Slaviansk
• Russia
• Crimea

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Obama uses Japan visit to reassure wary Asian allies

By Linda Sieg and Matt Spetalnick

TOKYO (Reuters) - U.S. President Barack Obama used a state visit to Japan on Thursday to try to reassure Asian allies of his commitment to ramping up U.S. engagement in the region, despite Chinese complaints that his real aim is to contain Beijing's rise.

Obama is being treated to a display of pomp and ceremony meant to show that the U.S.-Japan alliance, the main pillar of America's security strategy in Asia, remains solid at a time of rising tensions over growing Chinese assertiveness and North Korean nuclear threats.

"As you said, my visit here, I think, once again represents my deep belief that a strong U.S.-Japan relationship is not only good for our countries, but good for the world," Obama told Japanese Prime Minister Shinzo Abe at the start of their summit.

"Our shared democratic values mean that we have to work together in multilateral settings to deal with regional hot spots Around the globe, but also to try make sure we are creating a strong set of rules that govern the international order."

Behind the scenes, U.S. and Japanese trade negotiators for the two countries were working around the clock in Tokyo on a two-way trade pact seen as crucial to a broader trans-Pacific agreement.

"We're continuing to work," a U.S. official said on Thursday, before the leaders met on the first state visit to Japan by a U.S. president in 18 years.

"Autos and agriculture continue to be the focus, and our goal remains to achieve meaningful market access for American businesses, farmers and ranchers," the official said. "We've made some progress and worked around the clock.

Even if Obama and Abe cannot complete a bilateral trade deal before the U.S. president leaves Tokyo on Friday, they are likely to try to project a sense of progress on key issues.

BALANCING ACT

The diplomatic challenge for Obama during his week-long, four-nation regional tour will be to convince Asian partners that Washington is serious about its promised strategic "pivot" towards the region, while at the same time not harming U.S. ties with China, the world's second-biggest economy.

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U.S. President Barack Obama (C) reviews an honour guard during a welcoming ceremony at the Imperial  …

The difficulty of Obama's balancing act was underscored hours before he arrived on Wednesday night when Chinese state media criticized U.S. policy in the region as "a carefully calculated scheme to cage the rapidly developing Asian giant".

The official Xinhua news agency followed that on Thursday with a commentary that said: "...the pomp and circumstance Obama receives ... cannot conceal the fact that Tokyo has become a growing liability to Washington's pursuit of long-term interests."

Obama told Japan's Yomiuri newspaper that while Washington welcomed China's peaceful rise, "our engagement with China does not and will not come at the expense of Japan or any other ally".

An Obama-Abe joint statement is likely to specify that tiny Japanese-administered islands in the East China Sea, claimed by Beijing, fall under the U.S.-Japan treaty that obliges Washington to defend Tokyo, Japanese media said on Thursday.

This is standard U.S. policy, but putting Obama's name to such a statement would reassure Japan on an issue that is a source of tension between Asia's biggest powers.

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U.S. President Barack Obama meets with Japan's Prime Minister Shinzo Abe (R) at the Akasaka Pala …

Obama's trip will also include stops in South Korea, Malaysia and the Philippines. Leaders who will meet Obama are also keeping a wary eye on the crisis in Ukraine through the prism of their own territorial disputes with Beijing.

Some of China's neighbors worry that Obama's apparent inability to rein in Russia, which annexed Crimea last month, could send a message of weakness to China.

MESSAGE OF SOLIDARITY

The Japanese government lobbied hard to get the White House to agree to an official state visit, the first by a sitting U.S. president since Bill Clinton in 1996.

Topping Obama's schedule on Thursday was an audience with Emperor Akihito at the Imperial Palace and a summit with Abe followed by a joint news conference. He will also visit the Meiji Shrine, which honors the Japanese emperor who oversaw the country's rapid modernization in the late 1800s.

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U.S. President Barack Obama (L) inspects an honour guard during a welcoming ceremony at the Imperial …

At an official welcoming ceremony by Emperor Akihito, Obama walked smiling past Japanese schoolchildren waving small U.S. and Japanese flags, solemnly inspected a rifle-bearing military honor guard, and shook hands with Japanese dignitaries in front of the sprawling palace before heading inside with his hosts.

Abe will be trying to soothe U.S. concerns that his conservative push to recast Japan's war record with a less apologetic tone is overshadowing his pragmatic policies on the economy and security.

"Japan has been walking on the path of peace for seven decades after the war," Abe told Obama at the start of their talks. "An alliance between Japan and the United States, which share such values as freedom, democracy and human rights, as well as strategic interest, is indispensable as a cornerstone for peace and prosperity in the Asia-Pacific region."

Obama and Abe are expected to send a message of solidarity after strains following Abe's December visit to Tokyo's Yasukuni Shrine, seen by critics as a symbol of Japan's past militarism.

In his remarks to the Yomiuri, Obama has already assured Japan that the bilateral defense treaty covers the disputed islets, called the Senkaku by Japan and the Diaoyu by China.

The Obama-Abe joint statement will say the two allies will not tolerate any attempt to change the status quo there by force, a phrase that implicitly targets China.

(Additional reporting by Mark Felsenthal, Kiyoshi Takenaka, Antoni Slodkowski and Chris Meyers; Editing by Mike Collett-White, William Mallard and Alex Richardson)

• Politics & Government
• Foreign Policy
• Barack Obama
• Japan
• Shinzo Abe

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Australia transport bureau says beach debris not from MH370

MELBOURNE (Reuters) - Debris picked up on a beach in Western Australia this week is unlikely to have come from the Malaysian Airlines jet that vanished nearly seven weeks ago, Australia's transport bureau said on Thursday.

The Australian Transport Safety Bureau (ATSB) has assessed the material that washed up on the coast 10 km (six miles) east of the town of Augusta, near the southwestern tip of Australia, the bureau's spokesman said.

"It's considered highly unlikely to be from MH370," spokesman Tony Simes said.

ATSB commissioner Martin Dolan earlier told Australian Broadcasting Corporation radio that the bureau had examined detailed photographs of the debris and was satisfied it was not a lead in the hunt for the plane.

"We're not seeing anything in this that would lead us to believe that it is from a Boeing aircraft," he told ABC Radio.

Authorities have given no details on the material, which was the first discovery of suspected debris in weeks and the first since the detection of what were believed to be signals from the plane's black box flight recorder on April 4.

Seabed scans of a 10 km zone off the west coast of Australia have failed to turn up any wreckage, but Malaysia and Australia have vowed to plough on with the search for the plane that went missing on March 8 with 239 people on board.

The U.S. navy drone that has been scouring the seabed is due to end its first full mission in the southern Indian Ocean within days.

Malaysian acting Transport Minister Hishammuddin Hussein said the search authorities would need to "regroup and restrategize" if nothing was found in the current search zone, but said the search would "always continue".

"I can confirm in fact we are increasing the assets that are available for deep-sea search," he told a news conference in Kuala Lumpur on Wednesday, adding that the government was seeking help from state oil company Petronas, which has expertise in deep-sea exploration.

(Reporting by Sonali Paul; Editing by Chris Reese and Richard Pullin)

• Western Australia
• Malaysian Airlines

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China bans petitioners appealing directly to higher authorities

BEIJING (Reuters) - China has banned petitioners from taking their grievances directly to higher levels of government without first going through local authorities, state media reported on Thursday, in the latest effort to streamline its chaotic petitioning system.

The system of petitions dates back to imperial times as a means for citizens to bring grievances to the attention of government officials by bypassing the legal system or authorities, especially at the local level.

In practice, few of the cases are ever resolved and petitioners are frequently forced home or imprisoned by regional or provincial authorities when they seek to escalate their complaints to higher-level officials.

The State Bureau of Letters and Calls, responsible for handling petitions, stipulated in a new regulation that the central government will not accept complaints about issues that should be handled at provincial level, the People's Daily said.

"The purpose of this regulation is to clarify jurisdiction, regulate the procedure and improve the efficiency of handling petitions," Zhang Enxi, a spokesman for the body, was quoted as saying.

Higher levels of government departments will not accept petitions that bypassed the local government and its immediate superior, and petitions will be rejected if they are within the jurisdiction of the legislative and judicial branches, according the regulations

Petitioning has deep roots in China, where courts are influenced by the ruling Communist Party and local governments, and often seen as beyond the reach of ordinary people.

Petitioners often try to take local disputes ranging from corruption to land grabs to higher levels in Beijing, in the hopes of bypassing local governments that they deem corrupt or responsible for their mistreatment.

Despite international criticism, petitioners are often forced home or held in "black jails", unlawful secret detention facilities where detainees can be subjected to beatings, sleep and food deprivation and psychological abuse.

China has made a series of efforts to reform the system by cracking down on illegal imprisonment of petitioners and pushing for the process to go online. The government does not formally acknowledge that black prisons exist.

(Reporting by Li Hui and Ben Blanchard; Editing by Michael Perry)

• Politics & Government
• China

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Body of Korean boy who raised ferry alarm believed found

By James Pearson and Kahyun Yang

SEOUL (Reuters) - A South Korean boy whose shaking voice first raised the alarm that an overloaded ferry with hundreds of children on board was sinking has been found drowned in the underwater wreckage of the ship, his parents believe, the coastguard said on Thursday.

The parents had seen his body and clothes and concluded he was their son, but he has not been formally identified with a DNA test.

More than 300 people, most of them students and teachers from the Danwon High School, are dead or missing presumed dead in the April 16 disaster.

The Sewol, weighing almost 7,000 tons, sank on a routine trip from the port of Incheon, near Seoul, to the southern holiday island of Jeju. Investigations are focused on human error and mechanical failure.

Of the 476 passengers and crew on board, 339 were children and teachers from the school in Ansan, a gritty suburb on the outskirts of Seoul, who were on an outing to Jeju.

As the ferry began sinking, the crew told the children to stay in their cabins.

Most of those who obeyed died. Many of those who flouted or did not hear the instructions and went out on deck were rescued.

But only 174 people were saved and the remainder are presumed to have drowned.

Classes at the school resumed on Thursday with banks of floral tributes surrounding photos of each of the victims, dressed in their school uniforms. Almost 250 teenagers and teachers at the school have died or are presumed dead.

Fellow students filed past, offering white chrysanthemums in somber tributes.

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Mourners cry after paying tribute in Ansan, at a temporary group memorial altar for victims of capsi …

In the classrooms of the missing, friends posted messages on desks, blackboards and windows, in the days after disaster struck, asking for the safe return of their friends.

"If I see you again, I'll tell you I love you, because I haven't said it to you enough," read one.

The school provided therapy sessions for the children as they returned.

The first distress call from the sinking vessel was made by a boy with a shaking voice, three minutes after the vessel made its fateful last turn, a fire service officer told Reuters.

"SAVE US"

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A mourner prays in front of wreaths after paying tribute in Ansan, at a temporary group memorial alt …

The boy called the emergency 119 number which put him through to the fire service, which in turn forwarded him to the coastguard two minutes later. That was followed by about 20 other calls from children on board the ship to the emergency number.

"Save us! We're on a ship and I think it's sinking," Yonhap news agency quoted the boy as saying.

The fire service official asked him to switch the phone to the captain, media said, and the boy replied: "Do you mean teacher?"

The pronunciation of the words for "captain" and "teacher" is similar in Korean.

The ship, 146 meters (479 feet) long and 22 meters wide, was over three times overloaded, according to official recommendations, with cargo poorly stowed and inadequate ballast.

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Divers operate at the site where the capsized passenger ship Sewol sank in the sea off Jindo, during …

Moon Ki-han, an executive at Uryeon (Union Transport Co.), the firm that supervised cargo loading, told Reuters there were 105 containers onboard, some of which toppled into the sea as the ship listed.

Forty-five were loaded on to the front deck and 60 into the lower decks. In total, the ship was carrying 3,600 metric tons of cargo including containers, vehicles and other goods.

A member of parliament this week said the Korean Register of Shipping recommended a load of 987 tons for the Sewol.

Captain Lee Joon-seok, 69, and other crew members who abandoned ship have been arrested on negligence charges. Lee was also charged with undertaking an "excessive change of course without slowing down".

The confirmed death toll from the ship on Thursday was 159, with many of those found at the back of the ship on the fourth deck.

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South Korean rescue workers operate around the area where capsized passenger ship Sewol sank during  …

Recovery work on Thursday was concentrated on the third and fourth decks at the front of the ship with about 700 divers, working in shifts, and an extra 36 fishing boats involved, an official told a briefing.

Helping divers were drones and a crab-like robot, called a "crabster", which can feel for bodies along the seabed.

The volunteer element of the operation has been limited, the official said, adding an apology.

"When the volunteers came, we stopped the on-going operation and gave them the chance to dive," the official said. "The majority were in the water for less than 10 minutes due to limited visibility. There was also someone who didn't even dive and only took pictures."

Divers have been swimming through the dark, cold waters in the ferry, feeling for bodies with their hands.

"We are trained for hostile environments, but it's hard to be brave when we meet bodies in dark water," said diver Hwang Dae-sik.

(Additional reporting by Meeyoung Cho, Miyoung Kim, Sohee Kim an Ju-min Park; Writing by Nick Macfie; Editing by Raju Gopalakrishnan)

• Society & Culture
• Disasters & Accidents

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