Rebels in eastern Democratic Republic of the Congo (DRC) have captured a series of key towns, plunging the vast country into its worst conflict for nearly five years and threatening the credibility of the government and UN peacekeepers.

The mutineers, led by a renegade general sought by the international criminal court, have marched unchecked through swaths of the country's east, to just 40km from Goma, the capital of North Kivu province and headquarters of the UN mission.

The resurgence in fighting marks the latest chapter in the central African country's wars seemingly without end that have cost millions of lives. Eastern Congo is rich in minerals, riven by an alphabet-soup of ethnic militia groups and, according to a recent UN report, still poisoned by interference from its tiny neighbour, Rwanda.

The M23 mutineers – named after a peace deal they now criticise – want Congolese president Joseph Kabila to listen to their demands, insisting that they are ready to march on Goma if necessary.

The area seized by the M23 rebels

On Friday the rebels seized Bunagana, a key trading town on the border with Uganda, before forcing their way deeper into North Kivu province at the weekend. They occupied several small villages and took control of the town of Rutshuru, a major town, and Rumangabo, about 40km north of Goma.

The M23 leadership are all former fighters of the CNDP (National Congress for the Defence of the People) rebel group that fought a bloody insurrection from 2006 to 2008. Then they were led by Laurent Nkunda and the notorious general Bosco "the Terminator" Ntaganda, who has been indicted for alleged war crimes.

The territory now held by M23 mirrors that controlled by the CNDP before it launched devastating attacks on Goma and other towns in the eastern Kivu provinces. That conflict ended with peace agreements signed on 23 March 2009; M23 insists that Kabila has not adhered to the terms of those accords and demands their full implementation.

"If the Congolese government wants the problem to be solved by war, I'm ready to fight," M23 leader Colonel Sultani Makenga told the Guardian at the M23 base in Bunagana. "If they want peace talks, we shall have talks. If we have to march to Goma, we will do."

The government in faraway Kinshasa does not seem in the mood for peace talks. On 6 July the Congolese defence minister Alexander Tambo issued arrest warrants for Makenga and the M23 spokesman Vianney Kazarama, as well as Ntaganda, accused by the UN Group of Experts on the Congo of being a leader of the movement. Tambo's communique instructed "the defence and security services to urgently relaunch operations to find and arrest them."

The Congolese army's campaign against the rebels has not progressed well, with troops fleeing when they hear of the approach of M23. In Bunagana, some 600 Congolese soldiers, including elite Belgian-trained commandos hurriedly brought in to supposedly secure the town, escaped over the border into Uganda when M23 attacked.

Congolese company commander Petit-Petit Tamata, in the Ugandan border town Kisoro, said: "We're in Uganda because of what happened in Congo; we were on the border and were attacked by the rebels. In military we often call that a strategic withdrawal. Our company faced a superior enemy so we withdrew to protect our capacity and materials."

Civilians in the conflict zone say they are suffering from looting and abductions by both the fleeing army soldiers and the incoming rebels. "The Congolese army looted the population as they fled," said a young man in Kiwanja, 5km from Rutshuru, who wished to remain anonymous. "The army also took people with them, to carry their stuff."

In Rwanguba, on the road between Bunagana and Rutshuru and controlled by the rebels, people told similar stories. "On Friday [6 July] the M23 soldiers looted radios, telephones and money," Jean-Paul Bahati said.

"When the rebels arrive here they will need young guys or fighters, they'll take us young men by force," said the young man in Kiwanja. "Since my birth I've never touched a weapon. But when the rebels come they're going to give me a gun and teach me how to use it even though I don't want to be a fighter."

People in Kiwanja appear have good reason to fear the approaching rebels. In 2008 the CNDP massacred some 150 people in the town, an atrocity allegedly masterminded by Ntaganda.

M23, however, withdrew from Kiwanja and Rutshuru late on Sunday, leaving them in the hands of the local police and UN stabilisation forces. "But if the army returns [to Rutshuru and Kiwanja], we will fight them," said Makenga.

Rapid surrenders and defections by the Congolese army so far will cause anxiety in Kinshasa. The world's biggest UN peacekeeping mission, with nearly 20,000 uniformed personnel, has so far failed to stop the M23 in its tracks.

A young man in Kiwanja, who did not wish to be named, said: "When the population flees like this, all we want is the protection of Monusco (the UN mission). But when we seek protection, Monusco aren't interested in us."

The mission reported that UN helicopter gunships bombarded rebel positions on Sunday. But the fall of Goma would be disastrous for the UN, Kabila and his international backers. Stephanie Wolters, an independent political analyst specialising in the Great Lakes region, said: "I do think they're very capable of taking Goma. If that happens, Kinshasa will have suffered an irreparable blow.

"The big question now is who will negotiate with whom? Kinshasa knows there is no point negotiating with the M23 because who do they speak for? So will Rwanda come to the party? But that would be an admission of guilt on their part. If Rwanda doesn't feel it has to stop, the threat to Kabila is clear."