SLAVYANSK, Ukraine (CNN) -- A team of international military observers seized by pro-Russian separatists in eastern Ukraine was freed Saturday as Kiev resumed military action to tackle the pro-Moscow gunmen who have overrun the region.
Separatists abducted eight Western observers for watchdog Organization for Security and Cooperation in Europe in the flashpoint city of Slavyansk on April 25. They were seized alongside five Ukrainians. One of the observers was later released for medical reasons.
The self-declared mayor of Slavyansk, Vyacheslav Ponomarev, confirmed the release of the remaining 12 members of the OSCE, adding Russian envoy Vladimir Lukin, who arrived in eastern Ukraine on Friday, had helped negotiate their release.
An OSCE delegation waited to collect the observers at a checkpoint on the outskirts of the town, he said, adding there had been no prisoner exchange.
"Right now we are expecting another storming of the town," Ponomarev told CNN.
The OSCE also confirmed the release in a tweet.
British Foreign Secretary William Hague welcomed the news in a tweet, adding "all other hostages held by illegal armed groups should be released."
On Saturday, Kiev's government confirmed a second day of military operations in the east.
Interior Minister Arsen Avakov said the "active phase of the operation" would resume at dawn, with Ukrainian forces taking a television tower in Kramatorsk, some 16 kms (10 miles) from Slavyansk.
"We are not stopping," Avakov wrote on his Facebook page.
Residents were warned to stay indoors and off the streets.
"Fighting in Kramatorsk," Avakov later posted on his Facebook account, adding Ukrainian "special units were instructed to stop the provocation."
A CNN team on the outskirts of the city saw troop carriers moving toward the city center. Local residents described hearing gunfire in certain neighborhoods.
Amateur video posted online showed burnt out buses near the local administration in the city with residents calmly observing and even photographing the plumes of smoke. CNN could not confirm the authenticity of the video.
Ukraine's government security forces launched their most intensive effort yet on Friday to try to dislodge the separatists in the east who have reportedly seized government buildings in nearly a dozen cities and towns.
Pro-Russian separatists downed two Ukrainian helicopters in Slavyansk, according to to Kiev's defense ministry.
Five pro-Russian separatists and two civilians were killed in the city in a Ukrainian military operation, Ponomaryov said.
Slavyansk is strategically key because Ukraine has a stockpile of assault rifles and other light weapons near the city, according to Britain's Royal United Services Institute defense think-tank.
"Today, Kiev has upped the ante in the standoff and will test Russian resolve to prevent the Ukrainian government from regaining control of the city and its light weapons stockpile," it said in a commentary.
Clashes in the southern port city of Odessa sparked a fire that killed at least 31 according to police on Friday, raising the question of whether the country can stave off a possible civil war.
Forty-six people died following the blaze that started at a trade union building amid clashes, a spokesperson for the local prosecutor's office told CNN.
"We have identified very few bodies, but they were all local residents," the spokesperson said Saturday.
Ukraine's security service blamed the unrest in Odessa on "provocateurs."
"Illegal military groups from unrecognized groups participated in the events and were co-ordinated by provocateurs from the Russian Federation," the SBU security service said in a statement.
It said former top officials, once part of ousted Ukrainian President Viktor Yanukovych's inner circle and now "hiding in a neighboring country," had financed "provocateurs" to foment the unrest.
Video posted on YouTube appeared to show supporters of Kiev throwing Molotov cocktails at the building where pro-Russian separatists had reportedly taken up positions. The footage, which CNN could not independently confirm, showed people sitting on ledges trying to escape the fire and thick smoke.
The violence in Ukraine pits pro-Russian separatists against Ukrainian forces and those who support the government in Kiev. It prompted a meeting of the U.N. Security Council, with Russia demanding an end to what it called Ukrainian aggression and Western powers accusing Moscow of funding the violence.
Kiev's interior ministry said authorities had started three criminal investigations into the events.
"Police have detained 160 people who were most likely 'active participants during the incidents'," the ministry said on its website.
U.S. President Barack Obama and German Chancellor Angela Merkel pledged on Friday to seek harsher sanctions against Russia if Ukraine doesn't stabilize in time for elections this month. But the threat seemed to do little to waive off Moscow, with its foreign ministry saying Ukraine's
use of its military in Slavyansk is criminal.
Russia and the West squared off diplomatically over the fate of Ukraine after Moscow annexed the Black Sea peninsula of Crimea in March following Yanukovych's ouster. He was pushed from office after months of protests by people upset that he had turned away from Europe in favor of Moscow.
'Last nail in the coffin'
Russian President Vladimir Putin's spokesman, Dmitry Peskov, told CNN the military operation was "the last nail in the coffin" for the deal agreed to last month in Geneva, Switzerland, which called for illegal militia groups in eastern Ukraine to disarm and vacate seized buildings.
Slavyansk residents were warned on Friday to stay home and avoid windows as the latest phase of the authorities' "anti-terrorist operation" got under way.
The two Mi24 helicopters were downed with mobile air defense systems, killing two military officers and injuring others, according to a statement on Kiev's defense ministry's website. Another army helicopter, an Mi8, was damaged, but no one was hurt, it said.
Pro-Russian separatists took one badly injured pilot hostage after his helicopter was forced to make an emergency landing, the ministry said, and efforts to free him are ongoing.
Ukraine's SBU said one helicopter that came under attack was carrying medics, one of whom was injured.
CNN's Nick Paton Walsh reported from Slavyansk while Chelsea J. Carter wrote and reported from Atlanta and Marie-Louise Gumuchian from London. CNN's Arwa Damon in Donetsk, Claudia Rebaza in Kiev, and Matthew Chance and Alla Eshchenko in Moscow contributed to this report. CNN's Laura Smith-Spark. Andrew Carey, Khushbu Shah, Ralph Ellis, Elise Labott, Richard Roth, Boriana Milanova and Yon Pomrenze also contributed.
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