Vladimir Putin yesterday called Europe’s bluff over east Ukraine as Russia-backed separatists seized a strategic town in defiance of a ceasefire brokered by France and Germany.

The attack on Debaltseve by rebels loyal to the Russian president amounts to a test of the West’s resolve to stand up to him – at the risk of an escalation of the conflict.

Ukraine pulled thousands of troops out of an encircled town yesterday after a massive assault by pro-Russian rebels, who ignored a new ceasefire to seize the strategic railway junction.

The fall of the besieged town of Debaltseve was one of the worst defeats of the war for Ukraine’s troops, unable to stop an advance by Moscow-backed rebels fighting for territory the Kremlin calls “New Russia”.

Twenty-two Ukrainian soldiers had been killed in the town in the past few days, the Ukrainian military high command said, with more than 150 wounded.

Actions by Russia-backed separatists are clear violation of ceasefire

The Ukrainian troops had held out for three days beyond the start of a Europe-brokered ceasefire, forcing the rebels to disavow the truce to advance on the town.

The rebels described the battle as a victory and said they let the Ukrainian troops leave only after they were defeated.

The rebels say the ceasefire, negotiated by Ukraine, Russia, Germany and France at a summit in Minsk, Belarus, last week, never applied to Debaltseve, which links the two rebel-controlled regions of eastern Ukraine, Donetsk and Luhansk.

Poroshenko and the West say the rebel assault was reinforced by Russian tanks, artillery and soldiers, and that Moscow was behind the decision to disavow the truce and advance. Russia denies supporting the rebels.

A view of an explosion after shelling is seen not far from Debaltseve yesterday. Photos: Reuters

Putin showed no sign of backing down over Ukraine on Tuesday evening when he told Kiev’s pro-Western leaders to let their soldiers surrender in Debaltseve to avoid more bloodshed.

The refusal of the rebels even to pay lip service to halting the advance at Debaltseve puts Western countries in a bind. They need to decide whether to take more steps to punish Russia for violating the ceasefire, or place more emphasis on restoring the truce now that the contested town has fallen.

“The actions by the Russia-backed separatists in Debaltseve are a clear violation of the ceasefire,”EU foreign policy chief Federica Mogherini said in Brussels.

Allowing the rebels to capture the rail hub without a strong response to what the West calls a clear violation of the peace deal agreed on February 12 could look like appeasement of Putin.

But declaring the agreement dead would be likely to force Europe to impose new economic sanctions on Russia and increase pressure on US President Barack Obama to give Kiev lethal weapons.

Putin’s readiness to take big gambles, and to use the military option if necessary, puts him in the driving seat. But despite watching the rebels disavow the ceasefire to advance on encircled Ukrainian troops, Berlin, Paris and Washington are not rushing into a response.