Pro-Russian insurgents released a second team of observers from the Organisation for Security and Cooperation in Europe (OSCE), who had been held captive since the end of May.

OSCE spokesman Michael Bociurkiw said the four were released and met by an OSCE official in the eastern city of Donetsk. "They're in good health, they're in good spirits," he said.

OSCE lost contact with four monitors from its Donetsk team and four monitors from its Luhansk team in late May. The members of the Donetsk team were freed earlier this week.

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The second release followed a EU summit on Friday, where leaders decided not to immediately impose new sanctions on Russia for destabilising eastern Ukraine, but gave the Russian government and pro-Russian insurgents until tomorrow to take steps to improve the situation.

The EU leaders said Russia and the rebels should work to release all captives, retreat from border checkpoints and launch "substantial negotiations" on Ukrainian President Petro Poroshenko's peace plan.

"We have fulfilled our obligations before the Ukrainian side. All eight observers have been released," Alexander Borodai, one of the leaders of the insurgents, said after the release, according to news agency Interfax.

Ukraine on Friday signed a free-trade pact with the EU, the very deal that a former Ukrainian president dumped under pressure from Moscow in November, fuelling huge protests that eventually drove him from power.

Moscow responded to those events by annexing the mainly Russian-speaking Crimean Peninsula in March, and a pro-Russian insurgency in eastern Ukraine erupted the month after, leading to the developments that have brought Russia-West relations to their lowest point since the Cold War times.

The US and the EU have slapped travel bans and asset freezes on members of Russian President Vladimir Putin's inner circle and threatened to impose more crippling sanctions against entire sectors of Russia's economy if the Kremlin fails to de-escalate the crisis.