President Barack Obama has pledged up to $1bn in new US funding for European defence, reasserting Washington’s role in the region despite warnings from Russia that any military build up near its borders with eastern Europe could provoke a new arms race and a new Cold War.

The announcement at the beginning of Mr Obama’s four-day trip to Europe coincided with heavy fighting in Ukraine, where government forces launched a fresh offensive against the pro-Russian separatists who have taken over swathes of the eastern regions.

Ukraine’s elections late last month passed relatively smoothly, raising hopes of a diplomatic solution to a crisis which erupted in February when protesters ousted the pro-Russian president, Viktor Yanukovych, but the new president, Petro Poroshenko, is struggling to maintain control in the east, and on Wednesday leaders of the G7 group of industrialised nations will gather to discuss whether Russia has done enough to quell the insurgency – or if further economic sanctions are needed.

The meeting was meant to be hosted by the Russian President, Vladimir Putin, in the resort town of Sochi, but his annexation of Crimea in March sparked international outcry and an indefinite suspension of the G8 group as the West sought to reassess its relations with the Kremlin.

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