AS WORLD leaders gather in Wales for the Nato summit today, a ray of light momentarily crossed over the crisis in Ukraine but was swiftly obscured by yet another large, black Russian cloud.

Petro Poroshenko, the Ukrainian President, tweeted happily that a deal on a "permanent ceasefire" in rebel areas had been agreed with President Vladimir Putin, declaring: "Glory to Ukraine!"

The presidential press office in Kiev confirmed the breakthrough and Russian stocks shot up as the markets breathed a sigh of relief.

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But the forces around Donetsk were not told as rockets continued to fall on the city.

And then Moscow burst the bubble, insisting no deal had been done because Russia was not party to the Ukrainian conflict.

"Putin and Poroshenko did discuss steps which would lead to a ceasefire between rebels and Ukrainian troops," declared Dmitry Peskov, the Kremlin spokesman, but he insisted: "In principle, Russia cannot agree a ceasefire because it is not a participant in the conflict."

US president Barack Obama, in Estonia ahead of his trip to Newport, was canny and did not commit himself when talk of a ceasefire was jumping on the diplomatic grapevine.

"We haven't seen a lot of follow-up on so-called announced ceasefires," admitted Mr Obama. "Having said that, if in fact Russia is prepared to stop financing, arming, training, in many cases joining with Russian troops' activities in Ukraine and is serious about a political settlement, that is something we all hope for."

Later, Kiev amended its earlier statement, saying the leaders' "conversation resulted in agreement on a process for ceasing fire in the Donbass region (the areas of Donetsk and Luhansk)". But on a more hopeful note, it added that the two presidents had "reached a mutual understanding on steps leading to peace". Indeed, there were reports Mr Putin was hopeful of a peace deal between Kiev and the pro-Russian rebels by as early as tomorrow.

Since the conflict took hold earlier this year, the Russian President has been arguing hard for a federalised Ukraine as this would offer Russian-speaking areas broad autonomy. But his Ukrainian counterpart has flatly rejected the idea, fearing it could lead to the country breaking up. Instead, he has suggested a Scottish-style devolution of powers to give the Russian-speaking regions more say in governance and taxation.

The last time the Nato summit took place in Britain was in 1991 in London when it was hosted by Margaret Thatcher. It set out the alliance's vision of peace and friendship in Europe. Today, the Ukraine crisis, which has claimed the lives of more than 2,600 people since April, not including the 298 victims of the downed Malaysian airliner, has shattered the very notion of peace and friendship in Europe.

The aim of the summit will be to seek to reassure eastern European Nato members; one aspect of this will involve more military exercises in the region to deter any Russian aggression. While in Tallinn, Mr Obama told Estonia, whose population is made up of about 25 per cent ethnic Russians, it would "never stand alone".

In 2002, Nato stood down its high-readiness force; now the alliance is looking to create a whole new multi-national rapid reaction force of brigade size - around 5,000 men - that could be operational within two to five days.

UK Government sources made clear the West wanted to be a constructive partner with Russia, not an adversary, and indeed had made its most extensive partnership offer to Moscow but post-Ukraine "trust has been broken" and relations could take years to repair.

As Nato leaders discuss "inter-operability" with Kiev on how to bolster western forces in eastern Europe, EU ambassadors are this week in Brussels working on a new tranche of sanctions, including a halt to all European investment in Russia's oil companies.

It also emerged the US was looking at strengthening its sanctions by limiting hi-tech exports to Russia's Arctic oil and gas industry.

Talk has even been made of stripping Russia of its status as the host of the 2018 World Cup.

Yesterday, Arseniy Yatsenyuk, the Ukrainian Prime Minister, expressed hope Ukraine would soon join Nato. But this might not help de-escalation as, of course, the alliance's basic tenet is that an attack on one is an attack on all.

Today, as the talking continues with Nato's Ukraine commission meeting at the summit and President Poroschenko due to attend, the fighting on the ground continues.

Mr Yatsenyuk has branded Russia a "terrorist state" and suggested Kiev should build, Berlin-style, a wall along the border between the two countries.

With Nato leaders intent on using the summit to announce the creation of a rapid-reaction force in eastern Europe, Moscow let it be known there would be huge military exercises later this month in south-central Russia, involving some 4,000 troops and air power.

Blue diplomatic skies over Ukraine still seem some way off.