BUDAPEST (AFP) - Russian President Vladimir Putin on Tuesday urged Kiev to allow Ukrainian soldiers who are encircled by pro-Russian rebels in the town of Debaltseve to lay down their weapons.

"I hope that the Ukrainian authorities are not going to prevent the Ukrainian soldiers from laying down their weapons," Putin said in a press conference in Budapest, adding that he also hoped Kiev would not take legal action against the troops if they chose not to fight.

Putin said the Ukraine conflict could not be solved by "military means".

Ukraine on Monday admitted its troop were encircled in the strategic railway hub of Debaltseve in the east.

A defence spokesman, Anatoliy Stelmakh, told AFP that "several (army) units were surrounded" in the town, which has seen fierce fighting despite a European-brokered truce.

Aside from the street-to-street combat in Debaltseve on Monday, Putin said the three-day-old ceasefire was largely holding along the frontline.

Russia had noted "a significant drop in military activities" and in the number of attacks from both sides, he added.