Members of an honour guard wait for the separatist leader Alexander Zakharchenko in Donetsk, eastern Ukraine, yesterday.

Kiev said yesterday it would halt payment of state funds in areas controlled by pro-Moscow rebels, as both sides hardened positions in what is rapidly becoming a “frozen conflict a long-term stalemate that the West believes is Russia’s aim.

A day after the rebels held inauguration ceremonies for their leaders, the separatists and the central government each accused each other of violating a September peace deal and signalled they would withdraw support for some of its terms.

Both sides accuse each other of violating a September peace deal, signal withdrawal of support for some of its terms

The past four days have seen the rebels stage elections for leadership which the government called illegal, and the government respond by saying it would revoke a law that would have granted eastern regions autonomy and sent them cash.

Despite a ceasefire declared two months ago, two teenagers were killed by shelling in Donetsk, one of the two separatist strongholds, yesterday as they played football on a school sports field, the city’s administration said.

The rebels say their newly elected leaders must be allowed to negotiate with Kiev directly; Kiev says this is impossible. Both sides’ positions reverse parts of the 12-point peace plan, the Minsk protocol, agreed in Belarus in September.

Relatives visit graves of servicemen of Ukrainian military forces, who were killed in recent fighting, in Lviv yesterday. Photos: Reuters

With Kiev lacking the military might to break the rebels by force, Western allies now fear that a large chunk of Ukrainian territory will become a Russian protectorate with a parlous economic future,beyond the writ of the central government.

“We have now realistically entered the phase of a ‘frozen conflict’,” said Yury Yakimenko, a political analyst at Ukraine’s Razumkov political research centre, using a term often applied to other ex-Soviet republics where separatist enclaves have been protected by Russian troops since the early 1990s.

The American general who serves as the highest ranking Nato officer also said this week that the conditions for a frozen conflict were being created in Ukraine.

Russia seized and annexed Ukraine’s Crimea region in March, but has been more ambiguous about its intentions in eastern Ukraine, where it has supported separatist rebels but has not recognised their declarations of independence.

So far Moscow has stopped short of recognising the rogue elections held in Ukraine’s east on Sunday which elected leaders of two rebel “people’s republics” that jointly call themselves “New Russia”. Western governments see the votes as part of a scenario, worked out in the Kremlin, to perpetuate instability in Ukraine after the ex-Soviet republic of 46 million shifted policy westwards following the overthrow of a Moscow-backed president.

Kiev and the West fear Russian President Vladimir Putin’s grand design, following the annexation of Crimea, is to render Ukraine ineligible to become part of mainstream Europe, with an unresolved conflict within its borders.