NATO leaders on Thursday accused Russia of failing to take "a single step towards peace" in Ukraine even as President Petro Poroshenko voiced "careful optimism" about forging a ceasefire with pro-Moscow rebels.

The leaders gathered at a summit of the Western military alliance in Newport, Wales agreed to set up new funds to help Ukraine's military effort and treat wounded soldiers in a five-month conflict in which more than 2,600 people have been killed.

European and US officials at the talks also said they were ready to approve fresh economic sanctions on Russia on Friday, although implementation could be delayed pending ceasefire talks scheduled for the same day.

NATO leaders on Friday are also expected to approve plans to position troops and military equipment in Eastern Europe to reassure ex-Soviet bloc member states unnerved by Russia's actions.

"While talking about peace, Russia has not made one single step to make peace as possible," NATO chief Anders Fogh Rasmussen said after Ukraine-focussed talks at the leaders' summit.

"Instead of de-escalating the crisis, Russia has only deepened it," he said, adding that previous Russian statements on peace had been "a smokescreen for continued Russian destabilisation of the situation".

- Would welcome 'genuine' peace plan -

But Rasmussen left open the door to a seven-point peace plan put forward on Wednesday by Russian President Vladimir Putin, saying: "If we are witnessing genuine efforts for a political solution, I would welcome it".

Poroshenko said he was hopeful about the plan because the initiative had come from pro-Moscow rebel leaders in eastern Ukraine.

But he added that political negotiations would be a "tough challenge", warning that Ukraine's independence and territorial integrity were "not for negotiation".

Poroshenko said some NATO members would cooperate with Ukraine on "non-lethal and lethal military items" although he did not specify which countries were involved and whether it would include direct arms supplies.

Former US presidential contender and outspoken Kremlin critic John McCain, on a visit to Kiev, urged Western allies to provide Ukraine with weapons to fend of Russia, and warned that otherwise the country could end up being "landlocked".

Poroshenko earlier briefed a group of NATO leaders, including British Prime Minister David Cameron, US President Barack Obama, French President Francois Hollande and German Chancellor Angela Merkel.

Hollande called for a "real ceasefire" that would lead to a broader political agreement, and said France would only deliver warships worth 1.2 billion euros to Russia in November if these conditions were in place.

"If actions follow words remains to be seen tomorrow or in the coming days," Merkel said on the sidelines of the summit -- billed by NATO as one of its most important since the end of the Cold War.

There was little sign of change on the ground, with AFP reporters hearing explosions on the outskirts of the flashpoint city of Mariupol and renewed shelling and gunfire in the rebel stronghold of Donetsk.

Russian Foreign Minister Sergei Lavrov also lashed out, denying Russian involvement and accusing the United States of undermining peace efforts by supporting "a pro-war party" in Kiev.

He said Washington was "drunk on anti-Russian rhetoric" after repeated accusations from the West that Russia is training and supplying rebels and sending its soldiers into Ukraine.

- Mass Iraq kidnapping -

Ukraine tops the agenda at the two-day talks, but the 28 NATO leaders must also tackle the menace of Islamist extremists in Iraq and Syria and a problematic withdrawal from Afghanistan.

Cameron and Obama said in an editorial in the Times that they would not be "cowed" following the beheading of two US journalists by Islamic State (IS) jihadists and promised to "confront" the radicals.

There were reports of fresh brutality on that front.

Police and witnesses said IS kidnapped dozens of residents of a village in Kirkuk province after locals there burned one of its positions along with a jihadist flag.

IS-led militants launched a lightning offensive in northern Iraq in June, sweeping through much of the Sunni Arab heartland north and west of Baghdad before turning on Christian and Yazidi areas.

Rasmussen said NATO would "seriously" examine any request from Iraq for help in its campaign against the Islamic State, while Cameron said Britain was actively considering arming the Kurds.

NATO meanwhile faces another quandary in Afghanistan, where the alliance is due to end its combat operation this year, but finds it has no government to hand over to as presidential elections have failed to produce a winner.

Rasmussen warned that time was running out for a solution, raising doubts about NATO's planned post-2014 training mission after it formally concludes its longest-ever war this year.

"Time is short," he said.