WARSAW - President Barack Obama on Tuesday unveiled a $1 billion US security plan for eastern Europe aimed at allaying fears over a resurgent Kremlin and the escalating pro-Russian uprising in ex-Soviet Ukraine.

Obama launched a major tour of Europe in Warsaw where he will attend celebrations of the 25th anniversary of Poland’s first free elections, which put eastern Europe on a path out of Moscow’s orbit and toward democracy and free-market growth.

But the poignant ceremony has been haunted by those very countries’ fears of the Kremlin reasserting its Cold War-era grip over a large swathe of Europe, following its seizure of Ukraine’s Crimea peninsula in March.

“Our commitment to Poland’s security as well as the security of our allies in central and eastern Europe is a cornerstone of our own security and it is sacrosanct,” Obama said after inspecting a joint unit of US and Polish F-16 pilots.

Obama proposed an initiative of up to $1 billion (730 million euros) to finance extra US troop and military deployments to “new allies” in eastern Europe.

He also lamented the “steady decline” in traditional European powers’ own defence spending and accused them of failing to pull their weight in the NATO military bloc. “That has to change,” the US president said.

Obama’s “European Reassurance Initiative” - a historic plan that must be approved by the US Congress - would also build the capacity of non-NATO states, such as Ukraine and Georgia, to work with the United States and the Western alliance to build their own defences.

Obama’s first pivotal encounter will come Wednesday when he meets Ukraine’s president-elect Petro Poroshenko - a confectionery tycoon facing the unenviable task of keeping his economically ravaged country from slipping into an all-out civil war that Washington blames Moscow for orchestrating.

“Events in Ukraine have unfortunately unleashed forces that we had all hoped had been put away, were behind us,” US Secretary of State John Kerry said in Warsaw. “And so it requires new vigilance. It requires clear commitment.”

The seven-week pro-Russian insurgency in Ukraine’s eastern rust belt grew only more violent after Poroshenko swept to power in a May 25 presidential ballot on a promise to quickly end fighting and save the nation of 46 million from economic collapse.

Hundreds of separatist gunmen staged one of their biggest offensives to date on Monday, attacking a Ukrainian border guard service camp in the region of Lugansk on the border with Russia.

Ukraine’s military reported no fatalities and killing five rebels in a day-long battle, which saw insurgents pelt the camp with mortar fire and deploy snipers on rooftops surrounding the base.

A spokesman for Ukraine’s “anti-terrorist operation” in the east said one federal soldier was killed and another 13 wounded Tuesday in a new bout of fighting in the neighbouring coal-mining province of Donetsk.

Washington’s commitment to Ukraine will be reinforced when US Vice President Joe Biden travels to Kiev on Saturday to attend Poroshenko’s swearing in as the country’s fifth post-Soviet president.

The visit is meant to underscore the US position that the people of Ukraine - and not Moscow - should decide their destiny and overcome the cultural differences now tearing apart the vast country’s Russified east and more pro-European west.

Kiev has refused to invite Russian President Vladimir Putin to the inauguration as he has not formally recognised the result of the ballot, which saw rebels disrupt voting across swathes of the east.

Moscow will be represented instead by it’s acting ambassador to Kiev - the lowest-ranking foreign official at the event.

Ukraine and its eastern European allies such as Poland have been pushing the West to unleash painful economic sanctions against entire sectors of Russia’s economy in response to the Kremlin’s perceived support of the rebels.

Obama addressed those calls directly by telling a joint press conference with his Polish counterpart Bronislaw Komorowski that Russia faced further punitive measures unless it put restraints on the separatists.

“Further Russian provocation will be met with further costs for Russia including, if necessary, additional sanctions,” Obama said.

The most sensitive part of Obama’s swing will come Friday when he attends the 70th anniversary commemoration of D-Day in Normandy to which Putin was invited as well.

The US leader has spent months trying to isolate his rival and punish the Kremlin inner circle with sanctions that have cut it off from access to US and many Western banks.

Both the Kremlin and White House say Obama and Putin have no plans to meet for one-on-one talks. But senior White House aides have not ruled out an informal encounter - the first for the rivals since Ukraine mushroomed into Europe’s worst security crisis in decades.

Obama also called on Putin to accept Poroshenko’s invitation to hold in Normandy his first talks with a Ukrainian leader since the February ouster of Kremlin-backed president Viktor Yanukovych set Kiev on its new westward course.

The Kremlin confirmed that Putin would hold separate talks Friday with German Chancellor Angela Merkel and British Prime Minister David Cameron.

Putin is also to call on French President Francois Hollande in Paris on Thursday - the three meetings underscoring Europe’s continued economic dependence on Russia and refusal to completely ostracise the powerful Kremlin chief.