Donetsk: Ukraine`s new pro-Western leaders lost effective financial control over a vital eastern industrial region on Monday when pro-Russian rebels seized the central bank building in the separatist stronghold city of Donetsk.
The surprise offensive by dozens of Kalashnikov-wielding pro-Russian gunmen further complicated Kiev`s deadly and thus-far inconclusive two-month campaign to reunify the fractured ex-Soviet state.
The riverbank city of nearly one million mostly Russian speakers has been overrun by insurgent and left largely untouched by army units since early April.
But the gunmen had until now only occupied administration buildings and had no access to the vast sums flowing through the government`s tax collection service.
That threatened to change on Monday as masked guerrillas escorted personnel out of the National Bank of Ukraine in Donetsk.
"We have been preparing this for more than a month," Oleksandr Matyushyn -- a senior rebel commander disinguished by his camouflage jacket and a crossed hammers tattoo on his neck -- told AFP as five separatist gunmen stood guard at the bank`s main entrance and staff filed out of the building.
Matyushyn said his unit had entered discussions with local administrators about transferring control over the local treasury and tax collection service to the separatist leader of self-proclaimed "Donetsk People`s Republic".
"We are gradually taking control of the banking system. Our specialists have been working quite a long time to come to this stage," he said.He spoke as a group of gunmen rushed into the building, leading several casually dressed men with hands on the back of their heads.
A lone uniformed policeman walked past the bank without inquiring what was going on.
"Our country is a madhouse and has been for a long time," he told AFP.
The rebels swooped on the buildings during the heavily guarded funeral of two of rebel leader Denis Pushilin`s aides who were killed in a car bombing last week.
His deputy Volodymyr Makovych announced the financial takeover in a speech at the graveside.
"The former state bank and the treasury have become republican," he said.
The Ukrainian government said the raid had interrupted the payment of pension, social benefits and salaries to state employees.
"We are not receiving tax payments of Donetsk enterprises," it said in a statement.
Donetsk`s official but now largely powerless regional government complained in a statement that the rebels were "robbing state institutions".The Ukrainian crest had been torn down from the bank`s facade while armed men in black masks guarded its main entrance.
A sign announcing a "technical break" hung on the heavy wooden doors.
"They are having a meeting. Inside are loads of armed men," one woman said as she hurried away with other staff without giving her name.
AFP reporters saw the militants take out bottles of alcohol and a laptop in a pink case that appeared to belong to staff as well as tightly stuffed plastic bags.
Donetsk and the neighbouring coal and steel producing region of Lugansk declared independence from Kiev in disputed May 11 referendums whose legitimacy was rejected by state authorities and decried as a sham by the West.
Russian President Vladimir Putin urged Ukraine`s new pro-Western leaders to listen closely to the opinions expressed in the referendums but also refused to recognised the two regions` independence from Kiev rule.
An escalating offensive by government forces to regain control over the region of seven million people has now claimed the lives of more than 370 civilians and fighters on both sides.