(Adds U.S. State Dept comment on captured Americans)

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* U.S. in talks to further restrict Russian energy revenue

* Kremlin says captured Americans are mercenaries

* European Union to decide on Ukraine membership bid this week

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KYIV: Ukraine acknowledged difficulties in fighting in the east of the country as Russian forces captured territory and intensified pressure on two key cities ahead of an EU summit this week expected to welcome Kyiv's bid to join the bloc.

The governor of the Luhansk region, scene of the heaviest Russian onslaughts in recent weeks, said the situation was "extremely difficult" along the entire front line as of Monday evening and the Russian army had gathered sufficient reserves to begin a large-scale offensive.

Ukrainian President Volodymyr Zelenskiy had predicted Moscow would escalate attacks ahead of the EU summit on Thursday and Friday. In his regular address to the nation on Monday evening, he was defiant, while also referring to "difficult" fighting in Luhansk for Sievierodonetsk and its sister city Lysychansk.

"We are defending Lysychansk, Sievierodonetsk, this whole area, the most difficult one. We have the most difficult fighting there," he said. "But we have our strong guys and girls there."

Luhansk governor Serhiy Gaidai said Russian forces controlled most of Sievierodonetsk, apart from the Azot chemical plant, where hundreds of civilians have been sheltering for weeks. The road connecting Sievierodonetsk and Lysychansk to the city of Bakhmut was under constant shell fire, he added.

"Lysychansk has been suffering from massive Russian shelling all day. It is impossible to establish the number of casualties as of yet," Gaidai said.

Rodion Miroshnik, ambassador of the self-styled Luhansk People's Republic to Russia, said its forces were "moving from the south towards Lysychansk" with firefights erupting in a number of nearby towns.

"The hours to come should bring considerable changes to the balance of forces in the area," he said on Telegram.

Approval by EU leaders for Ukraine to become an official candidate to join the bloc would be marked as a triumph in Kyiv.

It applied for membership just four days after Russia's Feb. 24 invasion. It would take years to attain, but for the EU to reach deep into the heart of the former Soviet Union would bring about one of Europe's biggest economic and social transformations since the Cold War.

"I think that's very likely it would happen," U.S. President Joe Biden told reporters on Monday when asked whether he felt Ukraine would become an EU member.

 

ATTRITIONAL PHASE

Russia sent tens of thousands of troops into Ukraine on Feb. 24 in what it called a "special operation" to degrade its military capabilities and root out what it calls dangerous nationalists.

The war has entered a brutal attritional phase in recent weeks, with Russian forces concentrating artillery firepower on Ukrainian-controlled parts of the Donbas, which Moscow claims on behalf of separatists.

Ukrainian officials reported three civilian deaths in Russian shelling in the Donetsk region on Monday and another three in shelling in the Kharkiv region.

In Odesa, Ukraine's biggest Black Sea port, which is blockaded by the Russian navy, a Russian missile attack destroyed a food warehouse on Monday, Ukraine's military said.

Washington and its European allies have provided weapons and financial assistance to Ukraine but avoided direct involvement in the conflict. Some American citizens, however, have volunteered to fight for Ukraine.

 

CAPTURED AMERICANS

On Monday, the Kremlin said two Americans detained in Ukraine were mercenaries not covered by the Geneva convention who should face responsibility for their actions.

Kremlin spokesman Dmitry Peskov's comments were the first formal acknowledgment that the two, identified in U.S. reports as Andy Huynh, 27, of Hartselle, Alabama, and Alexander Drueke, 39, of Tuscaloosa, Alabama, were being held.

A U.S. State Department spokesperson said they had been in touch with Russian authorities regarding any U.S. citizens who may have been captured.

"We call on the Russian government – as well as its proxies – to live up to their international obligations in their treatment of any individual, including those captured fighting in Ukraine."

This month, a separatist court sentenced two Britons and a Moroccan to death after they were caught fighting for Ukraine.

Peskov also said U.S. basketball star Brittney Griner, held in Russia for over two months, was being prosecuted for drug offenses and was not a hostage.

A 52-year-old U.S. citizen, Stephen Zabielski, was killed in combat in Ukraine on May 15, according to an obituary published by his family and affirmed by the State Department, making him at least the second American to die in the war.

International concern has focused on trying to restore Ukrainian exports of food, now shut by a de facto Russian blockade. Ukraine is one of the world's leading sources of grain and food oils, leading to fears of global shortages.

Russia blames the food crisis on Western sanctions curbing its own exports.

The war has also disrupted energy markets, including Russian shipments of oil and gas to Europe, still the continent's main source of energy and Moscow's primary income source. Moscow blames EU sanctions for a decline in gas volumes, saying they prevented it from restoring pipeline pumping equipment.

On Monday, U.S. Treasury Secretary Janet Yellen said Washington is in talks with Canada and other allies to further restrict Moscow's energy revenue by imposing a price cap on Russian oil.

Moscow, meanwhile, threatened to retaliate against EU member Lithuania for banning transport of coal, metals, construction materials and advanced technology to Kaliningrad, a Russian outpost on the Baltic Sea surrounded by EU territory.

Russia's foreign ministry summoned Lithuania's top diplomat and demanded Vilnius reverse the "openly hostile" move or Russia "reserves the right to take actions to protect its national interests." Lithuania said EU sanctions obliged it to enforce the ban.

Kaliningrad's governor said Russia's foreign ministry would summon the EU ambassador to Moscow on Tuesday over the ban.

(Reporting by Reuters bureaus; writing by David Brunnstrom and Lincoln Feast; editing by Jonathan Oatis and Michael Perry)