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Pro-Russian gunmen and activists react while listening to a speaker as they declare independence for the Luhansk region in eastern Ukraine on Monday, May 12, 2014. Pro-Russia separatists in eastern Ukraine declared independence Monday for the Donetsk and Luhansk regions following their contentious referendum ballot.Evgeniy Maloletka)

The Donetsk People's Republic lurched to life Monday, with separatist leaders vowing to drive the Ukrainian military off their territory and appealing to join neighbouring Russia.

They also said they would prevent national elections from taking place here on May 25, a move certain to spur further confrontation inside a disintegrating Ukraine. Kiev and its allies in the West say the vote – the first since a February revolution that toppled the Moscow-backed government of Viktor Yanukovych – must be held no matter what.

Further escalating tensions, Russia's state-owned energy giant Gazprom said it would cut off the flow of natural gas to Ukraine on the morning of June 3 if Kiev didn't pay a $3.5-billion debt. Most of Ukraine's battered economy is reliant on Russian-supplied natural gas.

The Donetsk People's Republic was declared Monday by Denis Pushilin, a 32-year-old businessman who is accused of having run a pyramid scheme before emerging last month as the political leader of a pro-Russian rebel movement whose gunmen seized control of government buildings around the Donetsk region.

The separatists claim to have won 89 per cent support in a hastily arranged independence referendum held Sunday. "We have received sovereignty, the right to decide independently to enter into a confederation or federation with any country," Mr. Pushilin told a packed press conference held inside a government building that has been converted into a fort, surrounded by a wall of tires and razor wire.

Asked by a reporter which country they were now standing in, Mr. Pushilin replied: "The Donetsk People's Republic."

A second "People's Republic" was also launched Monday in the neighbouring oblast, or province, of Lugansk. Pro-Russian separatists in Lugansk – which like Donetsk is an economically depressed and predominantly Russian-speaking chunk of southeastern Ukraine – declared autonomy after claiming 96 per cent support in their own referendum on Sunday.

Leaders of the Lugansk separatists also said they would not allow the May 25 election to take place in the region.

Interim Ukrainian President Oleksandr Turchynov called Sunday's referenda a "criminal farce" that "will not have any legal consequences except for the prosecution of its organizers." Western governments also slammed the votes as illegitimate, with the White House spokesman saying the United States does not recognize the results.

But the separatists received expected support from Russia. A statement released by the Kremlin on Monday said "Moscow respects the expression of will of the population in the Donetsk and Lugansk regions."

Almost immediately after declaring sovereignty, Mr. Pushilin appealed to Moscow to absorb Donetsk, which he said had "always been part of the Russian world." Addressing a packed press conference inside a government building held by pro-Russian gunmen, Mr. Pushilin bemoaned the collapse of the Soviet Union as a "catastrophe."

"Based on the will of the people and on the restoration of a historic justice, we ask the Russian Federation to consider the absorption of the Donetsk People's Republic into the Russian Federation," he said.

The NATO military alliance says Russia has tens of thousands of troops massed on the other side of its border with Ukraine. Russia says troops that were conducting announced exercises near the border have now returned to their bases.

In March, the southern region of Crimea declared independence from Kiev – and was swiftly annexed by Moscow – following a controversial referendum there. Russia, however, has thus far continued to publicly refer to Donetsk and Lugansk as parts of Ukraine, though Moscow says the country should adopt a new constitution that gives more power to its regions. The Kremlin also called Monday for "dialogue between representatives of Kiev, Donetsk and Lugansk."

Meanwhile, Canada announced economic sanctions and travel bans on 12 more Russians and Ukrainians, including the Donetsk separatist leader Mr. Pushilin. The European Union also imposed additional sanctions on a top aide to Russian President Vladimir Putin and the commander of Russian paratroopers as well two confiscated Crimean energy companies, bringing to 61 the number of Russians and Ukrainians the EU has targeted with asset freezes and visa bans.

The first hours of Donetsk's new mini-state were marked by calm on the streets of this city of one million people, as most residents carried on with their lives Monday as if nothing out of the ordinary were happening. But in a sign the new normal is an anxious one, almost all bank machines in the region ran out of cash several days ago.

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