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Ukraine's forces say they attacked a Russian armoured convoy that crossed on to Ukrainian soil "and part of it no longer exists" - reported the SkyNews.
Military officials in Kiev said they tracked the vehicles, including armoured personnel carriers, from the border and then attacked with artillery.
President Petro Poroshenko discussed the incursion with British Prime Minister David Cameron and said a "considerable part of this equipment was destroyed overnight by Ukrainian artillery".
Sky's Sam Kiley said if the claims are true "it is a very serious development" in the four-month conflict, and "could be the beginnings of something much more dangerous".
World stock markets have tumbled on the news.
Russia denied its forces had crossed into Ukraine, and accused Kiev of trying to sabotage deliveries of aid.
The Russian vehicles crossed the border near the town of Donetsk on Thursday night, according to journalists from The Guardian and Daily Telegraph.
This was later confirmed by Nato chief Anders Fogh Rasmussen, who said it was a "clear demonstration of continued Russian involvement in the destabilisation of eastern Ukraine".