(Updates with close of talks)
MINSK, Sept 1 (Reuters) - Pro-Russia separatists sat down for preliminary Ukraine peace talks on Monday due to resume later this week in the Belarussian capital Minsk, saying they would be prepared to stay part of Ukraine if they were granted "special status".
The meeting of the so-called "contact group", at which the rebels also said one of their key conditions would be for Kiev to immediately end its military offensive, ended without any details being announced but a promise to continue consultations.
The separatists issued their call as the Ukrainian military faced a run of reverses on the battlefield which Kiev has ascribed to support for the rebels from at least 1,600 Russian combat troops. Moscow denies its troops are in Ukraine.
Russia, in particular, has been pushing for a fresh meeting of the "contact group", in which Ukraine is informally represented by Ukrainian ex-president Leonid Kuchma.
Moscow's ambassador to Kiev and a senior official for the Organization for Security and Cooperation in Europe also took part in Monday's meeting, but Ukraine has no official negotiators at the table.
The sides are expected to meet again on Friday, Russian news agencies cited a pro-Russian rebel leader as saying after the meeting.
"This is just the beginning of the process," Andrei Purgin, one of the leaders of the self-proclaimed Donetsk People's Republic, told Russian state television.
"When consultations continue on September 5," he said, "steps toward a potential ceasefire will be discussed and we will actively talk about a possible prisoner exchange."
The separatists' demands did not appear, at first sight, to be acceptable to Kiev since they would leave the rebels in control of territory of Ukraine's industrialised east.
But the rebel leaders, whose positions are likely to be backed by Russia, will be counting on Kiev's recent military setbacks weighing on any final decision.
Arriving for the talks, Purgin said the separatists wanted recognition of special status for their territories with the right to conduct their own foreign trade policy to allow them to integrate with the Russian-led Customs Union.
This would fly in the face of the European integration policies of Kiev's pro-Western government, which has signed landmark association and free trade agreements with the European Union and aspires one day to being an EU member. (Reporting by Vladimir Kostin in Minsk; Writing by Richard Balmforth and Alissa de Carbonnel; Editing by Andrew Roche and Peter Graff)
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