(Adds quote in paragraph 4)
By Thomas Grove
SLAVIANSK, Ukraine, April 26 (Reuters) - Separatists in the eastern Ukrainian city of Slaviansk are ready to exchange a group of international observers they are holding for fellow rebels who are in the custody of the Ukrainian authorities, their leader said on Saturday.
Asked about a prisoner exchange, Vyacheslav Ponomaryov, de facto mayor of Slaviansk, told reporters: "The Kiev junta has our fellows and comrades therefore, if there is a possibility, we are ready for an exchange."
"They (members of the observer mission) are in alright condition. One of the soldiers suffers from diabetes, but it is not a serious condition, he is on tablets. There is medicine there is food," said Ponomaryov.
"Prisoners have always been coins to exchange during times of war. It's an international practice."
"They are being kept in good conditions. There is no physical duress being used because they are all working with our people," he said, without elaborating.
"They were soldiers on our territory without our permission, of course they are prisoners," he said. "We won't know what to do until we determine who they are, what kind of activities, for what purpose they came here."
He said the Russian government had not been in contact with him to discuss the observers' release.
A German government source said a negotiating team from the Organisation for Security and Cooperation in Europe (OSCE) is on its way to try to secure the observers' release.
Asked if he would meet the negotiators, Ponomaryov said: "I am always in contact with representatives of the OSCE. If they come to us, they would warn me about it. They (separatist militiamen) will let them through our checkpoints. I am always ready to talk to them and to meet them." (Reporting by Thomas Grove; Writing by Christian Lowe; Editing by Pavel Polityuk)