Russian soldiers are nowhere to be seen in city captured by rebels, but locals insist that the Kremlin's troops led the advance

As Ukraine's president told an EU summit in Brussels that there were now "thousands" of Russian troops operating in his country, they had all but disappeared from view in the eastern town that has been the flashpoint for invasion claims.

Novoazovsk, not far from the border with Russia and miles away from other areas controlled by separatists, was captured by an armoured column on Wednesday evening that appeared to cross from Russia, and there were several reported sightings of similar "little green men" to those who appeared prior to the annexation of Crimea: well-equipped troops without insignia who appeared to be from elite Russian units immediately stood out from the ragtag fighters of the separatist militias.

On Saturday, however, there was no sign of these troops in or around the town, as rebel fighters settled in and the green men apparently retreated. It left locals, the Ukrainian government and world leaders wondering whether the seizure of Novoazovsk had been part of a major new offensive that could see Russian-backed forces take the city of Mariupol and perhaps even open a land corridor to Crimea, or whether it was more of a poker move by the Russians and the rebels, an attempt to create panic before retreating to their previous positions.

The rebel commander in Novoazovsk – who goes by the nickname Swat – said his men were Ukrainians, mostly from the Luhansk region, and that he was a former lieutenant-colonel in the Ukrainian special forces. Despite Ukrainian assertions that Russian artillery has been firing across the border to support the rebels, Swat said his men had not received any military support from Russia. He said they had moved south along the border, but not through Russian territory, to capture Novoazovsk.

However, local people said the initial assault had involved a different kind of soldier. A woman named Raisa said Russian troops, not rebels, had first taken the city. "My former husband was in the army for 26 years. I know soldiers when I see them. These were regular troops … from Russia," she said, as she milked her two cows along the roadside.

On Saturday, grey-haired men in camouflage were working on a rusty tank flying the red-and-blue flag of Novorossiya, a historical area along the southern coast of Ukraine conquered by the Russian empire, which rebels say they are trying to resurrect as an independent government. The area encompassed a huge swath of Ukraine, reaching as far west as Odessa.

Kremlin-watchers noted one point in particular in Vladimir Putin's statements in recent days. Not only did the Russian president say the Ukrainian army tactics were reminiscent of the Nazis, but he also referred in an address to "the militias of Novorossiya", causing concern that the Kremlin's strategy now involves creating a kind of "breakaway state" encompassing a large area of south and east Ukraine. This would also give Russia a land corridor to Crimea which, since annexation by Russia, has only been accessible to mainland Russia by aircraft or by a ferry crossing across a congested strait.

Putin and Russia have called for an immediate ceasefire in the region, and for the Ukrainian president, Petro Poroshenko, to negotiate with the pro-Russia leaders in the east, but Kiev has branded them "terrorists" and wants to re-establish control over the areas rather than let a de facto independent statelet spring up. Since peace talks between Putin and Poroshenko yielded little concrete progress on Tuesday, the Russian activity on the ground appears to have intensified.

European politicians have struggled to formulate a response to Putin's actions in Ukraine, with no appetite for a military confrontation, but several rounds of sanctions have apparently only strengthening the Kremlin's resolve. Nevertheless a number of politicians have said that a further round of sanctions will be in the offing if Russian policy does not change.

"What's happening in Ukraine is so serious that the European Council will be obliged to react by increasing the level of sanctions if things remain as they are," said the French president, François Hollande, on Saturday as he arrived for an EU summit in Brussels.

Poroshenko was given a warm welcome at the summit and at a news conference claimed that there were now hundreds of tanks and thousands of troops from Russia inside Ukraine. He gave mixed signals over hopes for de-escalation and said he expected to see progress towards peace in the coming weeks, but added that the need for peace was so great because "we are too close to the border from where it would be no return to the peace plan".

The immediate question is whether an assault on Mariupol is forthcoming, or whether the talk of it is psychological warfare from the Russian side.

"We will help the locals start a rebellion and then move forward," said Swat in Novoazovsk, claiming that rebel forces had virtually surrounded Mariupol and were waiting to attack. They would create a corridor to his home city of Odessa, he said. However, a drive along the roads outside Mariupol proved repeated rumours that rebel forces had surrounded the city to be false on Saturday.

As on previous days, at the edge of Mariupol on the road from Novoazovsk, soldiers and volunteers dug trenches near a Ukrainian military checkpoint. The defences, however, seemed more psychological than physical, with a nearby sliproad left unguarded and no visible major defence force in the area.

Columns of Ukrainian armoured personnel carriers and other military vehicles drove into Mariupol on Friday and Saturday, but it remained unclear whether the Ukrainians would actually fight for the city if there was a well-coordinated advance. A commander of the Azov battalion, a volunteer outfit helping the Ukrainian army defend the city, said he had information from Ukrainian security services that between five and 10 "curators" from Russian military intelligence were in Mariupol to coordinate pro-Russia forces in the event that a takeover of the city did take place.

Mariupol has its share of Ukrainian patriots, as was demonstrated in a pro-Kiev rally earlier in the week. It also has a number of separatist supporters, many of whom turned out to back independence for the so-called Donetsk People's Republic in a referendum in May, when the town was under separatist control.

But by now most residents, as in much of the region, are suspicious of both Kiev and the separatists and simply want the uncertainty and violence to stop. "It might seem calm here, but in our hearts we are not calm," said Artur Kovtun, a 47-year-old resident of Mariupol. "Everyone is tired of this. A lot of people here support the separatists. We wanted to be part of Russia earlier in the year, but now we just want this stress to end."