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Gunmen fortify positions

Pro-Russian insurgents dug in Tuesday across eastern Ukraine, fortifying positions around seized buildings and erecting new barricades even as Ukrainian troops and tanks set up outside one eastern city now controlled by armed men.

In Kyiv, Ukraine's acting president, Oleksandr Turchynov, announced an "anti-terrorist operation" to root out the separatists, but it was unclear how that measure differed from the one announced Monday, which resulted in no visible action.

Much of the focus Tuesday was on the eastern city of Slovyansk, 160 kilometres from the Russian border, which has come under ever more secure control of the gunmen since it was taken over last weekend.

An Associated Press reporter saw at least 14 armoured personnel carriers with Ukrainian flags, one helicopter and military trucks parked 40 kilometres north of the city Tuesday. Other heavy military equipment appeared nearby, along with at least seven busloads of government troops in black military fatigues.

"We are awaiting the order to move on Sloyvansk," said one soldier, who gave only his first name, Taras.

Government troops at a checkpoint there, located outside the town of Izyum, searched vehicles driving by for weapons.

Despite fears of a possible imminent assault by Ukrainian troops, the city appeared calm. Roads into Slovyansk were dotted with militia checkpoints, at least one with a Russian flag. Another bore a sign "If we don't do it, nobody will."

Still, the threat the Ukrainian military posed to the highly organized, pro-Russian insurgents was unclear. One video posted online late Monday showed a hapless Ukrainian tank stuck in the mud in a field reportedly outside Slovyansk. Residents chased it on foot, shouting "Who are you going to fire at?"

The insurgents, many of them armed, continued to occupy government, police and other administrative buildings in at least nine cities in the country's Russian-speaking east of the country, demanding broader autonomy and closer ties with Russia. The central government has so far been unable to rein in the insurgents, and many local security forces have switched to their side.

Ukraine's security services on Tuesday identified a man it says is a Russian foreign intelligence agent who is running the pro-Russian operations in Slovyansk. It named him as Igor Strelkov, and said he also co-ordinated Russian troops in Crimea during the seizure of military facilities there.

Russia itself still has tens of thousands of troops massed along Ukraine's eastern border. Western governments accuse Moscow of fueling the unrest in eastern Ukraine and worry that any bloodshed could be used as a pretext for a Russian invasion, in a repeat of events in Crimea a few weeks ago. Russia annexed the Crimean Peninsula after seizing it last month following the ouster of Ukraine's pro-Russian president in February.

In a phone call Monday, Russian President Vladimir Putin urged President Barack Obama to discourage the Ukrainian government from using force against protesters in the country's east.

A wave of sit-ins, meanwhile, has hit the eastern city of Horlivka, where a police station was seized Monday by unidentified gunmen. Outside the station, a sign pinned to a barricade of tires listed items required by protesters, including blankets, drinking water and tape to cover up windows smashed during the storming.

Anatoly Zhurov, a 53-year-old Horlivka resident, said the insurgents' goal was to resist the government in Kyiv.

Elsewhere, the Interior Ministry said a police station in the eastern city of Kramatorsk that had been seized by pro-Russian gunmen was "liberated" Tuesday, but a small airport nearby was still controlled by the militia.

Turchynov, speaking to the parliament in Kyiv, gave few details of the "anti-terrorist operation," saying only that it would be conducted in a "responsible and balanced" manner. He blamed Russia for sponsoring the camouflage-wearing insurgents, who are often armed and move with a precision unlikely for local militia.

"(Russia wants) the whole south and east of Ukraine to be engulfed by fire," Turchynov said, adding the government operation aimed to "defend the citizens of Ukraine, to stop terror, stop crime and stop attempts to tear our country into pieces."

Russia strongly warned Kyiv against using force against the pro-Russian protesters, saying that could prompt Moscow to walk out of Thursday's international conference on Ukraine in Geneva.

"You can't send in tanks and at the same time hold talks. The use of force would sabotage the opportunity offered by the four-party negotiations in Geneva," Russian Foreign Minister Sergey Lavrov said Tuesday.

In a sign that Ukraine's economic situation is becoming even more dire, its central bank increased its benchmark interest rate by a whopping 7 per cent to 14.5 per cent. The move aims to contain the risk of inflation by supporting the currency, which has been falling to record lows in recent days.

However, hiking interest rates can damage the economy by making loans and mortgages more expensive.

Ukraine has relied on cheap gas supplies from Russia for years. Moscow raised the gas prices for Kyiv in the past weeks, leaving Ukraine scrambling to pay the mounting gas bills as well as past bills that Putin now says adds up to over $35 billion.

In the wake of Moscow's threats to cut off energy supplies to Ukraine, the German utility company RWE AG said Tuesday it has started supplying gas to Ukraine via Poland and could sell it up to 10 billion cubic meters of natural gas a year. Ukraine consumes between 52 and 55 billion cubic meters of gas a year.

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