Russian President Vladimir Putin's spokesman said the offensive "effectively destroyed the last hope for the implementation of the Geneva agreements" which were intended to defuse the crisis.
Two Ukrainian helicopters were shot down and two of their crewmembers killed on Friday morning, both sides said. The Ukrainian Security Service said one of the helicopters was shot down with a surface-to-air missile, which it said undercut Russia's claims that the city is under control of civilians who took up arms.
Stella Khorosheva, a spokeswoman for the pro-Russian militants, said one of their men was killed and another injured. She offered no further details.
The center of Slovyansk appeared quiet but empty and tense while fighting outside the city seemed to be over by Friday morning when an Associated Press crew got into town.
Putin's spokesman, Dmitry Peskov, said the Kremlin had sent an envoy to Ukraine's southeast to negotiate the release of foreign military observers who were captured by pro-Russian militia in Slovyansk.
In comments to Russian news agencies, Peskov said the Kremlin has not been able to get in touch with the envoy, Vladimir Lukin, since Ukraine launched the offensive. However, Russia's Interfax and RIA Novosti quoted Lukin's aides as saying he was in touch and safe.
The action came a day after Putin said that Ukraine should withdraw its military from the eastern and southern regions of the country. Russia has massed tens of thousands of troops along the Ukrainian border as it warns Ukraine's military not to move against the insurgents in the east.
The Ukrainian Security Service said its forces were fighting "highly skilled foreign military men" in Slovyansk.
The Security Service said one helicopter was shot down with a surface-to-air missile, a sophisticated weapon, which they said countered Russia's claims that the city is under control of civilians who took up arms.
Ukraine's acting president, Oleksandr Turchynov, said this week that some troops were "either helping or cooperating with terrorist organizations."
The Ukrainian interior minister, Arsen Avakov, said in a statement that government troops met fierce resistance, but had managed to take control of nine checkpoints on roads around Slovyansk.
Avakov called on the insurgents to lay down the arms and release the hostages they have taken.
"We are ready to negotiate with protesters and their representatives," Avakov said on Friday. "But for terrorists and armed separatists there is only punishment."
The official spokesman for the military wing of the pro-Russian forces, who will give only his first name, Vladislav, said fighting had broken out at several points around the city. He said government armored vehicles were seen on roads leading into Slovyansk and claimed that Ukrainian troops had made incursions into the city itself.
Details of these claims could not be independently confirmed.
On the road leading into Slovyansk from Kramatorsk to the south, an Associated Press reporter saw six Ukrainian armored vehicles parked on the side of the road Friday morning.
An AP cameraman saw black plumes of smoke on the edge of the city. An emergency siren had sounded at dawn.
The armed element of the insurgency is focused on Slovyansk, a city 160 kilometers (100 miles) west of Russia in which seven European military observers from the Organization for Security and Cooperation in Europe remain held by pro-Russia gunmen.
Putin said Thursday that Ukraine should withdraw its military from the eastern and southern regions of the country.
Hours later, Torchynov ordered that the military draft be renewed, citing "threats of encroachment on the nation's territorial integrity" and interference by Russia in its internal affairs.
Moscow has consistently denounced Ukrainian security forces' largely ineffectual operation against the eastern insurgents and warned against committing violence against civilians.
In a telephone conversation with German Chancellor Angela Merkel, Putin said the removal of military units was the "main thing," but it was unclear if that could be construed as an outright demand.
Earlier in the week, the acting president said police and security forces had been effectively "helpless" against insurgents in the Donetsk and Luhansk regions, the heart of the unrest, and that efforts should be focused on preventing the instability from spreading to other parts of the country.
Nataliya Vasilyeva in Moscow and Maria Danilova in Kiev contributed to this report.
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