By Aleksandar Vasovic and Gleb Garanich
VUHLEHIRSK/KRAMATORSK, Ukraine, Feb 10 (Reuters) - Rebel fighters made a push on Tuesday to cut off a government-held road and rail junction in east Ukraine, vowing on the eve of peace talks that they would not cease fire until they had achieved their aim of taking more territory.
Some 30 miles (50 km) north of the front line, in government-held Kramatorsk, rockets slammed into the headquarters of Ukraine's local military operation and a nearby district of residential apartment blocks. The rebels denied firing on the town.
Russia, Ukraine, France and Germany are due to hold a summit in Minsk on Wednesday under a new Franco-German initiative to halt fighting that in recent weeks reopened a war which has killed more than 5,000 people.
European officials have so far held out minimal hope for the talks, saying the rebels and Moscow have few reasons to halt while they are taking new ground.
In Vuhlehirsk, a small town captured by rebels last week, volleys of artillery crashed in both directions as the rebels pushed to encircle government forces holding out in the nearby garrison of Debaltseve, the main target of the rebel advance.
Rebels sounded triumphant and said they had no intention of halting until they have trapped the government troops in the town, which controls vital road and rail links.
"The Debaltseve bubble has been shut firmly. We will not let them out. There is no way they can get out," said a commander of a reconnaissance unit who identified himself by the nom de guerre of Malysh - "Little One."
Asked whether the rebels sought a ceasefire now, Malysh, who said he was a Russian fighter and not a Ukrainian, replied: "We are absolutely against it. They will have time to regroup. We have them now."
Debaltseve is a major road and rail hub linking the two main rebel strongholds Donetsk and Luhansk, and capturing it seems to be the main objective of rebels who abandoned a five-month truce last month.
In Kramatorsk, scene of the rockets strike, a Reuters photographer saw the body of at least one woman killed; regional authorities said three people died and 15 were wounded.
The Kremlin, which the West accuses of sending arms, weapons and soldiers across the frontier to help fight for territory it calls "New Russia," announced month-long war games on Tuesday involving about 2,000 troops on its side of the border. Russia denies involvement in the fighting in Ukraine
The renewed fighting has brought calls in the West for more pressure against Moscow. U.S. President Barack Obama is weighing whether to deliver weapons to Kiev.
He met Germany's Chancellor Angela Merkel on Monday but announced no decision, despite several senior officials in his administration coming out last week in favor of sending some arms.
The issue threatens to divide Western countries that have so far maintained a common position. European countries oppose sending weapons to Kiev, arguing that this would only escalate the war while providing far from enough fire power for the Ukrainians to win it.
Kiev announced on Tuesday that its forces had launched a counter-offensive in the southeast to relieve separatist pressure on the coastal town of Mariupol, the biggest city in the rebellious provinces still in government hands.
"Units of the National Guard have broken through enemy defenses (near Mariupol) and gone on the offensive," a statement by the national defense and security council said.
Details of that counter-offensive could not be confirmed, but it is unlikely to provide much relief at the main battle front where government forces have been steadily pushed back.
Dmytro Tymchuk, a military analyst with good sources in the Kiev armed forces, said the rebels near Debaltseve were now trying to cut off the main highway - and the main supply line for government forces - running north at Logvynove.
Military spokesman Andriy Lysenko said on Tuesday that an attack on Logvynove had been pushed back but fighting was ongoing there. He said Russian forces were building up just inside Russia near the joint border.
Seven Ukrainian soldiers had been killed and 23 wounded in the past 24 hours, military spokesman Anatoly Stelmakh said.
Many Western countries believe Russian President Vladimir Putin's main objective is to establish a stable "frozen conflict" in eastern Ukraine, with rebels in firm control of territory that would give Moscow leverage over Ukraine.
If so, capturing Debaltseve could be the extent of the rebel ambitions for now: holding the road and rail link would make existing rebel territory more secure.
An assault on Mariupol, a strategically important port, would be a far more ambitious aim, potentially bringing the prospect of street fighting for a city of 500,000 people. (Additional reporting by Pavel Polityuk, Alessandra Prentice and Richard Balmforth; Writing by Peter Graff; editing by Janet McBride)