A total of 230,000 people have fled their homes in the face of Ukraine's spiralling conflict, the United Nations refugee agency said today. 

UNHCR spokesman Dan McNorton said the number of people who have left the conflict zone for other Ukrainian regions was now close to 100,000.

He said an estimated 130,000 had crossed the border into Russia.

Ukrainian forces have been battling pro-Russian separatists in the two eastern regions for months, with both sides face accusations of failing to keep civilians out of the line of fire.

Ukrainian troops have retaken the strategically-important city of Lysychansk in the east of the country. 

They are pressing on with their offensive to stamp out a pro-Russian rebellion, President Petro Poroshenko said.

"Ukrainian forces have raised the flag over the town council in Lysychansk," the presidency said in a statement last night.

Operations were continuing to drive the remaining insurgents out of the town, the statement added.

Lysychansk is a city of around 105,000 about 90km northwest of the rebel stronghold of Luhansk.

It was seized by separatists in early April at the start of a bloody insurgency that has now claimed the lives of about 1,000 people, including 298 people on board the downed MH17.

The government offensive against the rebels has made significant progress since rebels unexpectedly fled a string of key towns earlier this month.

Government forces say they are now closing in on the major cities of Luhansk and Donetsk, where the bulk of the insurgent fighters have dug in and pledged to fight to the death.

Europe must stand up to Putin, says Cameron

British Prime Minister David Cameron has said the loss of Malaysian Airlines flight MH17 must prove a catalyst for changing Russia's approach and ending the conflict in Ukraine.

Russia has been attempting to destabilise a sovereign state, violate its territorial integrity and arm and train thuggish militias, and the world has paid the price, he wrote in an opinion piece in the New York Daily News.

Mr Cameron has been pushing the European Union to impose harder-hitting sanctions on Russia after the downing of the Malaysian airliner in Ukraine, advocating an EU ban on future sales of military equipment to Moscow.

The 28-nation EU has been under pressure from the United States and Ukraine to take a harder line on Russia.

However, some EU governments are wary of potential retaliation from Moscow, the bloc's biggest energy supplier.

"Hurting Russia economically will carry some pain for our own economies too," Mr Cameron wrote.

"But serious economic measures are the only language that Russia will understand."

The European Union governments agreed yesterday to add 15 people and 18 companies or other organisations to the bloc's sanctions list for undermining Ukraine's territorial integrity, diplomats said.

"It is time to make our power, influence and resources felt," Mr Cameron wrote in the newspaper article.

"Together with America, Europe must do what is necessary to stand up to Russia and put an end to the conflict in Ukraine before any more innocent lives are lost."