Separatists have flown the Russian flag on armoured vehicles taken from the Ukrainian army today.
The action humiliated a Kiev government operation to recapture eastern towns controlled by pro-Russia partisans.
Six armoured personnel carriers were driven into the rebel-held town of Slaviansk to waves and shouts of "Russia! Russia!".
It was not clear whether they had been captured by rebels or handed over to them by Ukrainian deserters.
Another 15 armoured troop carriers full of paratroops were surrounded and halted by a pro-Russian crowd at a town near an airbase.
They were allowed to retreat only after the soldiers had handed over the firing pins from their rifles to a rebel commander.
The military setback leaves Ukraine looking weak on the eve of a peace conference tomorrow, when its foreign minister will meet his Russian, US and European Union counterparts in Geneva.
Arriving in Geneva ahead of the meeting, Ukrainian Foreign Minister Andrii Deshchytsia said there is still time to ease tensions in Ukraine.
"I think that we still have a chance to de-escalate the situation using the diplomatic means," he said.
"And we will try hard. We are trying hard - not only Ukraine - but also the United States. However, the time is now, not only to express the concerns, but to look for a more concrete and adequate response to Russia's plans and actions."
As US Secretary of State John Kerry flew into Geneva, a senior US official said that President Barack Obama had put the onus on Moscow to calm the crisis.
"With regard to sanctions, the president has been very clear that if Russia does not take this opportunity to de-escalate, the costs are going to go up," the official told reporters.
Russia has responded to the overthrow of Russian-backed Ukrainian president Viktor Yanukovych in February by declaring the interim Ukrainian government an illegitimate gang of fascists.
It has also announced 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 EU took a step towards imposing tougher economic sanctions on Russia by informing its member states of the likely impact of proposed measures on each of them.
Countries have a week to respond before the European Commission starts drawing up plans for sanctions on energy, finance and trade.
To keep the sensitive material from leaking, each of the 28 member states was told only of the expected risks its own economy would face.
The information was handed to each EU ambassador in a sealed brown envelope.
Russia seized and annexed Ukraine's Crimea peninsula last month, and its armed supporters have now taken control over swathes of Ukraine's eastern industrial heartland.
So far, the US and EU have imposed only targeted sanctions against a list of Russian and Ukrainian individuals and firms, which Russia has openly mocked.
The US and the EU say they are working on far tougher measures.
The Ukrainian government confirmed that six of its armoured vehicles were now in the hands of separatists.
Photos of their number markings showed they were among vehicles deployed earlier in the government's attempted "anti-terrorist" operation.
Ukraine had sent the convoy of paratroopers to capture an airfield, the start of an operation to reclaim 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 Russian agents are coordinating the uprising.
Russia denies it is involved and says Ukraine is precipitating civil war by sending troops to put down the revolt.
The government in Kiev is seeking to reassert control without bloodshed, which it fears would precipitate a Russian invasion.
The operation is the first test of Ukraine'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.
EU warns of impact from Russian sanctions
The documents are part of the ongoing preparations by EU officials ahead of possible sanctions against Russia over the crisis in Ukraine.
Officials have been examining the macro-economic implications for each member state of sanctions against Russia.
The Government will have a number of days to confirm or correct the data in the document, as to the possible impact on a ban on exports to or imports from Russia.
The document, which Irish officials received today in Brussels, will also examine the impact of retaliatory measures by Russia on the Irish economy.
EU heads of government have pledged to impose wide-ranging trade sanctions on Russia should it intervene militarily in eastern Ukraine or should it be deemed to be destabilising parts of the country.