Vladimir Putin said Russia will not allow separatist rebels in eastern Ukraine be defeated by Kiev forces, adding that he nevertheless believes peace in the country is still possible.

In an interview with German television ARD, the Russian President dodged a question on whether Moscow was arming the insurgents, saying only that "anyone waging a fight that they believe fair will find weapons".

Putin said that with no weapons rebel forces would be quickly crushed by Kiev, something the Kremlin "does not want, and will not allow".

Last week, Nato accused Moscow of funnelling large amounts of military equipment, including tanks and troops, into the restive regions of Donetsk and Luhansk.

It was the last in a series of such allegations moved against the Kremlin by the West and Kiev since the crisis erupted, earlier this year. Russia has always denied the allegations.

In the interview with ARD, however, Putin also admitted that Russian troops had been deployed in Crimea, which declared its independence from Ukraine and was subsequently annexed by Russia after a referendum in March.

"Yes, I make no secret of it, it is a fact and we never concealed that our Armed Forces, let us be clear, blocked Ukrainian armed forces stationed in Crimea, not to force anybody to vote, which is impossible, but to avoid bloodshed, to give the people an opportunity to express their own opinion about how they want to shape their future and the future of their children," Putin said.

The Kremlin had initially strongly denied reports that unmarked green military forces there were Russian. However, after the annexation, Putin went public, thanking its troops for successful operation.

Last week, monitors with the Organisation for Security and Cooperation in Europe (OSCE) said they witnessed a "convoy of 43 unmarked green military trucks, with tarpaulin covers," just outside the rebel stronghold of Donetsk, in eastern Ukraine.

In the interview broadcast late Sunday, Putin said he is convinced there is a way to solve the current crisis, adding that he favours a federalisation of Ukraine - which he described "a big European country with a European culture."

"It's a great nation with great people," he said. "But, you know, there's just one thing missing: an understanding that to be successful, stable and grow, everyone needs to have a feeling that this is their home no matter what language they speak - whether it's Hungarian, Russian, Ukrainian or Polish."

His comments came as EU foreign ministers were discussing possible new sanctions against Russia and rebel leaders.