DONETSK, Ukraine (AFP) - Ukraine's embattled premier on Friday vowed to give more powers to the country's regions in an effort to stamp out a separatist insurgency as a new gas war with Russia threatened European supplies.
Prime Minister Arseniy Yatsenyuk's promise during an unannounced visit to the blue-collar coal mining region of Donetsk came as militants armed with Kalashnikovs barricaded themselves inside the local administration building and demanded a referendum on joining Russia.
A similar occupation of the state security office of the hardscrabble eastern city of Lugansk has confronted the untested leaders with their biggest challenge since their February ouster of a Kremlin-backed president and decision to strike an alliance with the West.
But Russian President Vladimir Putin - his troops already massed along Ukraine's eastern frontier following their seizure of Crimea - only upped the stakes on Thursday by threatening to cut off Ukraine's gas over unpaid bills.
The decision could limit the supplies of at least 18 European nations for the third time since 2006. Each of the previous interruptions also coincided with attempts by Kiev to pull itself out of the Kremlin's historic sphere of influence.
Mr Putin's warning came after Russia had already hiked Ukraine's energy price by 81 per cent and demanded that his neighbour rewrite its constitution in order to give eastern regions the right to set their own economic and diplomatic relations with Moscow.
The Kremlin's emphatic response to its possible loss of control over the nation of 46 million has plunged its relations with the West to post-Cold War lows and forced NATO to urgently step up the defence of former Soviet satellite states.
Mr Putin's gas threat prompted the US State Department on Thursday to denounce "Russia's efforts to use energy as a tool of coercion" and President Barack Obama to raise the possibility of a third and most painful yet round of sanctions against Moscow.
The sabre rattling has set an ominous tone to the first round of international negotiations on Europe's worst crisis in decades that US and EU diplomats had managed to convince both Moscow and Kiev to join in Geneva on April 17.
'MORE REGIONAL AUTHORITY'
But Mr Yatsenyuk was more preoccupied on Friday with trying to end a five-day siege by pro-Kremlin militants who have seized strategic buildings and exposed Kiev's limited sway over the heavily industrialised east.
He flew overnight to Donetsk to enlist the help of its mayor and Rinat Akhmetov - Ukraine's richest man and one of its most legendary powerbrokers - in finding a bloodless solution to the militants' occupation of the local government seat.
Mr Yatsenyuk immediately addressed one of the protesters' most pressing concerns by promising never to limit the use of Russian in the region.
"No one under any circumstances will restrict the use of a language that a person is accustomed to using," he told local officials.
He also admitted that he "must respond to people's desire to have more regional authority."
"We will implement this task within the framework of constitutional reforms," he said.
Kiev has previously said it was ready to grant more powers to the regions while stopping well short of creating the federation sought by Russia.
Mr Akhmetov for his part warned Mr Yatsenyuk against any use of force to dislodge the militants - a possibility raised by the Ukrainian interior minister earlier in the week.
"I am against bloodshed," the tycoon told Mr Yatsenyuk. "The only right path is through negotiations." Mr Yatsenyuk agreed that force was not an option but did not immediately indicate how he intended to resolve the standoff.
The tinderbox atmosphere in Ukraine's biggest cities has been matched by increasingly passionate rhetoric in diplomatic capitals around the globe.
The Ukrainian crisis found itself near the top of the agenda of World Bank/IMF meetings in Washington that saw US Treasury Secretary Jacob Lew confront his Russian counterpart Anton Siluanov.
Mr Lew told the finance minister that "the United States is prepared to impose additional significant sanctions on Russia if it continues to escalate the situation in Ukraine."
World Bank President Jim Yong Kim for his part warned Russia that sanctions and other repercussions could push Russia - its economy already flatlining - into recession by the end of the year.
"This is a very serious issue for Russia - a very serious issue for its growth prospects," the World Bank chief told reporters.
But Russian Foreign Minister Sergei Lavrov stuck to a firm line on Friday by accusing Europe of backing a dangerous nationalist group of leaders in Kiev "and turning a blind eye to neo-Nazi phenomena, whether in Ukraine or elsewhere."