MOSCOW/ MARIUPOL, Ukraine: President Vladimir Putin on Sunday dramatically raised the stakes in the Ukraine conflict by calling for the first time for statehood to be considered for the restive east of the former Soviet state.

“We need to immediately begin substantive talks ... on questions of the political organization of society and statehood for southeastern Ukraine with the goal of protecting the lawful interests of the people who live there,” Putin was quoted as saying by Russian news agencies on a TV show broadcast in the far east of the country.

Russia has previously only called for greater rights under a decentralized federal system to be accorded to the eastern regions of Ukraine, where predominantly Russian-speakers live. In the program, taped on Friday, Putin did not directly address additional Western sanctions on Russia. Putin however blamed the crisis in Ukraine on the West, accusing it of supporting a “coup” against pro-Kremlin President Viktor Yanukovych in February.

“They should have known that Russia cannot stand aside when people are being shot almost at point-blank,” said Putin, adding that he did not have in mind “the Russian state but the Russian people.” Putin has denied that Moscow has sent regular troops to fight in Ukraine, but pro-Russian rebels have said that many Russian soldiers have volunteered while “on vacation.”

Pro-Russian separatists were preparing a fresh offensive on a key coastal location in eastern Ukraine on Sunday, as EU leaders gave Moscow one week to curb its support for the rebels or face new sanctions.

A ragtag mix of volunteer battalions and local residents were bracing for a desperate defence of Mariupol, a strategic port city and the last big town in the region still under Ukrainian control.

“We can hold them off, but for how long? We don’t have the strength to beat them,” said Panther, a tattooed fighter with the Azov battalion, said to be one of the most radical nationalist groups fighting in the area.

The renewed rebel assault of the past week has raised fears in Brussels that the conflict in eastern Ukraine could descend into a “full-scale war” with Russia that risks engulfing the entire continent.

The European Union agreed to take “further significant steps” if Moscow did not rein in its support for the rebels, EU President Herman Van Rompuy said on Sunday after a meeting of the bloc’s 28 heads of state.

They ordered the European Commission, the EU’s executive arm, to draw up options for new sanctions within a week.

“Everybody is fully aware that we have to act quickly given the evolution on the ground and the tragic loss of life of the last days,” Van Rompuy told a news conference.