(Removes incorrect reference to first meeting between foreign ministers in paragraph 3)
* Tensions rise on eve of four-way talks on Ukraine in Geneva
* Pro-Russian rebels drive armoured vehicles into Slaviansk
* Moscow, Kiev trade charges of "civil war" and "terrorism"
By Gabriela Baczynska and Thomas Grove
KRAMATORSK/SLAVIANSK, Ukraine, April 16 (Reuters) - S eparatists flew the Russian flag on armoured vehicles taken from the Ukrainian army on Wednesday, humiliating a Kiev government operation to recapture eastern towns controlled by pro-Moscow partisans.
The armoured personnel carriers were driven into the rebel-held town of Slaviansk to waves and shouts of "Russia! Russia!". It was not immediately clear whether they had been captured by rebels or handed to them by Ukrainian deserters.
The military setback leaves Kiev looking impotent before a peace conference in Geneva on Thursday, when its foreign minister will meet his Russian counterpart for one of the first times since Moscow-backed president Viktor Yanukovich was toppled in February after deadly protests.
Moscow has responded to the overthrow of Yanukovich by declaring the Kiev government an illegitimate gang of fascists and announcing its right to intervene militarily across the former Soviet Union to protect Russian speakers, a new doctrine that has overturned decades of post-Cold War diplomacy.
The Ukrainian government confirmed that six of its armoured vehicles were in the hands of separatists. Photos of their number markings showed they were among vehicles taken earlier in the government's attempted "anti-terrorist" operation to secure control of the town of Kramatorsk.
Kiev has sent paratroops to retake towns held by separatists who have declared an independent "People's Republic" in the industrial Donbass region.
The Ukrainian government and its Western allies believe Russia is behind the uprising, which follows Moscow's seizure and annexation of Ukraine's Crimea region last month. Moscow denies it is involved and says Kiev is precipitating civil war by sending troops to put down the revolt.
The Kiev government is seeking to reassert control without bloodshed, which it fears would precipitate a Russian invasion.
The operation is the first test of Kiev's under-funded army, which had until now played no role in six months of internal unrest. The government seems to have resorted to using troops after losing faith that police in the east would stay loyal.
Government troops began their operation on Tuesday, arriving by helicopter to take control of an airfield at Kramatorsk. They drove armoured personnel carriers (APCs) flying the Ukrainian flag into the town in the early morning.
But several of the same vehicles later rumbled into Slaviansk, 15 km (9 miles) away, with Russian and separatist flags and armed men in motley combat fatigues on top. They stopped outside the separatist-occupied town hall.
A soldier guarding one of the six troop carriers said he was a member of Ukraine's 25th paratrooper division, the unit sent by Kiev to recapture Slaviansk and Kramatorsk.
"All the soldiers and the officers are here. We are all boys who won't shoot our own people," he said, adding that his men had had no food for four days until local residents fed them.
However, a spokesman for the separatists and a witness in Kramatorsk said the Ukrainian troops had given up their vehicles to the rebels after talks.
EQUIPMENT SEIZED
The Defence Ministry in Kiev said the vehicles had been captured. "A column was blocked by a crowd of local people in Kramatorsk with members of a Russian diversionary-terrorist group among them," it said. "As a result, extremists seized the equipment."
Overhead, a Ukrainian jet fighter carried out several minutes of aerobatics above the town's main square. A government official said Ukraine's defence minister was travelling to Kramatorsk to try to clarify the situation.
The pro-Russian separatists began the uprising in the east by seizing government buildings in three cities on April 6, and have tightened their grip in recent days. Their armed paramilitaries now control buildings in about 10 towns and have seized hundreds of weapons.
Two people were killed on Sunday in Slaviansk, including a Ukrainian state security agent shot dead.
Kiev calls the uprising a blatant repeat of the seizure of Crimea, where armed pro-Russian partisans also occupied buildings, declared independence and proclaimed themselves in charge of state bodies. The main difference so far is that Russian troops have not appeared overtly as they did in Crimea, where Moscow already had military bases.
NATO says there are 40,000 Russian soldiers amassed on the frontier, forces which could capture eastern Ukraine in days.
Thursday's Geneva conference will see the Russian and Ukrainian foreign ministers meet for the first time in the presence of U.S. and European counterparts.
But as in the case of Crimea last month, the diplomacy appears to have fallen far behind the pace of events on the ground, with pro-Russian partisans establishing control of territory before Western countries can muster a response.
Russian President Vladimir Putin is scheduled to speak on Thursday at an annual question and answer session with citizens, which could signal how far he intends to go in Ukraine.
A triumphant speech he gave in March justifying the annexation of Crimea has been seen as a decisive moment in Russia's relations with the West, signalling Moscow no longer feels bound by customary rules governing the use of force.
BRINK OF CIVIL WAR
Putin told German Chancellor Angela Merkel in a telephone call late on Tuesday that Kiev had "embarked on an anti-constitutional course" by using the army. "The sharp escalation of the conflict puts the country, in effect, on the brink of civil war," the Kremlin quoted him as saying.
Washington and NATO have made clear they will not fight to protect Ukraine. Instead, NATO announced urgent new steps to reinforce the security of alliance members that border on it.
"You will see deployments at sea, in the air, on land, to take place immediately. That means within days," NATO Secretary-General Anders Fogh Rasmussen told a news conference after meeting of ambassadors from the 28-member alliance.
Ukrainian Prime Minister Arseny Yatseniuk accused Moscow of "exporting terrorism to Ukraine".
Russian Foreign Minister Sergei Lavrov, speaking in Vietnam before heading to Geneva, said Kiev should listen to what he called the voice of the people of Ukraine and avoid force. "It is unacceptable to use (the armed) forces in eastern Ukraine," he told reporters.
After several days of delay, Ukraine's operation began at the Kramatorsk airfield on Tuesday, where Ukrainian soldiers disembarked from two helicopters. Reporters heard gunfire that seemed to prevent an air force plane from landing.
There was no sign of violence in the area on Wednesday. Pro-Moscow activists turned out to oppose the Ukrainian troops.
A group of about 30 local residents blocked the APCs briefly and tried to prevent them going through. Soldiers dismounted and pushed them away. One shot was fired in the air in a brief scuffle before the vehicles moved on.
Kiev authorities say there were no casualties from Tuesday's action.
The protesters managed to take away one hand-held radio and two rifle magazines from the soldiers.
"I think Donbass should be an independent country allied with Russia," said a local resident who gave his name as Olexander. "My homeland is the Soviet Union. We just need to chop off the rotten west of Ukraine and we'll be fine."
In the regional capital Donetsk, at least 20 armed separatists occupied the city council building on Wednesday, a spokeswoman for the council said. Rebels there have declared the independent "Donetsk People's Republic" and say they intend to take charge of all government machinery. They have called for Putin to send troops to help them if they are attacked.
The Russian Foreign Ministry rebuked French Foreign Minister Laurent Fabius for saying in parliament that Moscow was clearly behind the rebellion and its objective was to prevent or discredit a planned May 25 presidential election.
"If the four-way meeting with Russia and Ukraine does not produce a result, we have to move to phase three of sanctions, which means economic sanctions," Fabius said.
So far, the EU and United States have imposed only visa bans and asset freezes on a limited number of individuals and firms, measures which Moscow has openly mocked.
The Western countries plan to add more people to the existing sanctions lists and are also contemplating wider measures to hurt the Russian economy more broadly.
EU officials said preparations for curbs on trade, energy and financial ties with Moscow were still at an early stage and an agreed expansion of the existing sanctions list would probably not come until next week at the earliest. (Additional reporting by Christian Lowe in Moscow, Richard Balmforth in Kiev and Nguyen Phuong Linh in Hanoi; Writing by Paul Taylor; Editing by Will Waterman and Giles Elgood)
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