SLOVYANSK, Ukraine — Two months ago a band of chanting pro-Russian separatists marched past commuter traffic into the state treasury building in Donetsk—the east Ukrainian city they now say they rule following Sunday’s flawed secession referendum. Their first order of business: instructing startled officials to stop transferring the region’s tax money to Kiev and to give it to them instead.

Twelve days before, Ukrainian President Viktor Yanukovych had fled Kiev, ousted after months-long protests by pro-European agitators. Revolution was in the air and now a bunch of pro-Russian protesters faced the state treasurer of Donetsk oblast, a province with 4.3 million people—10 percent of Ukraine’s population—and much of the country’s heavy industry. At first nervous, the portly state treasurer’s confidence grew as he realized the emphatic would-be revolutionaries were ignorant of the complexity of state finance and didn’t even realize revenues were not physically stored in the treasury but were deposited in various commercial bank accounts.

What started out as a confrontation turned swiftly into a noisy class on the intricacies of taxes and pensions, with the state treasurer switching from sitting defensively in his chair to standing up, smoking a cigarette and teaching.

“Would there be enough revenue to cover all the obligations in Donetsk without Kiev’s contribution?” the state treasurer asked them. And in a Saturday Night Live moment, the revolutionaries protested they were sure there would be.

Well, “pretty sure,” they amended.

The leader of the group, Pavel Gubarev, a man who declared himself the “people’s governor” of Donetsk oblast at a rally four days before, can be spotted in an online video of the confrontation student-like scribbling notes as the state treasurer lectures. The would-be revolutionaries are finally advised to open bank accounts and to set up a country before they can demand tax.

That surreal moment of revolutionary play-acting by a motley group of Moscow-backed insurrectionists is now being performed every day in what feels to increasingly frustrated locals like a make-believe state.

The separatists now say with Sunday’s sham referendum they have formed a sovereign country. But they are ill prepared and blithely ignorant of the mechanics of practical politics—let alone state making. And their naiveté stands in marked contrast to the gravity of the position they find themselves in: at the center of an effort to dismember a real country and in the middle of the biggest East-West standoff since the Cold War.

The towns in the region where the separatists hold sway are trapped in a twilight world created by an obscure nine-year-old separatist party called the Donetsk Republic, where stores open their doors and businesses try to get on with trading, but where government doesn’t really function. Courts have stopped working in some towns and capricious leaders and unpredictable camouflaged gunmen, or club-wielding unemployed youths eager for status, arbitrarily enforce what passes for order in separatist flashpoints.

“We are reduced to waiting to see what happens—everything is on hold,” says Vladimir, a 45-year-old lawyer in the town of Slovyansk, 100 kilometers north of the city of Donetsk. He and his wife, also a lawyer, are standing in a long, irritable queue to retrieve cash from one of only two functioning banks in the town of 130,000. Since this rust belt town is the main target of an “anti-terrorist” operation by Kiev, its 23 other banks have shuttered for safety reasons. Maybe Ukrainian security forces will come storming in or maybe they’ll just continue with a seemingly aimless siege that is punctured by occasional clashes on the outskirts.

“The court here is not functioning,” says Vladimir, the frustrated attorney. He is clutching more out of habit than for any practical reason his black briefcase. “People can’t get divorced, land disputes can’t be settled and broken contracts aren’t being enforced,” he says. “It is very stressful for people. My wife and I have had no work for two months.”

It isn’t clear if Vladimir will have cases to plead for some time to come—if the Donetsk Republic persists. It’s made up of nothing more than seized government buildings in a dozen cities, armed followers (predominantly former soldiers drawn from either the Ukrainian or Russian armies commanded by a Russian military intelligence officer) and people with selective nostalgia for the bygone Soviet Union. The same applies in the neighboring oblast of Luhansk, which on the basis of its own dubious plebiscite has declared sovereign status.

There is no constitution ready, no idea about what the new country’s political system should be and nothing planned yet on how to draw up new laws to replace the Ukrainian legal system. Prior to the uprising no detailed thought had been given to this. There are no blueprints—despite the fact that the hard-core separatist leadership has been agitating for years and grumbling obsessively in apartments and dingy cafés about how things would be better, if only Donetsk oblast could restore a short-lived, self-declared republic from 1918 that lasted anarchically for one month before even the Soviets wearied of it.

Some of the leaders, like Vladimir Makovich, the speaker of the presidium of the self-styled Donetsk Republic, who sports a long Russian Orthodox-style beard, were members of a conspiratorial, informal Slav history-discussion group. Secretive and Masonic-like, the few dozen members had a special membership badge designed. Makovich himself is a keen ecologist—and other members like him are opposed to shale gas drilling.

Aside from separatist dreams, the leaders come from different political traditions and seem able to swap ideological allegiances with unabashed ease.

Thirty-one-year-old Gubarev, who has had a series of jobs, including advertising salesman and seasonal work for an entertainment company as a Santa Claus for hire, has switched affiliations with careless intellectual promiscuity—shifting from membership of the neo-Nazi Russian National Unity party to joining the pan-Slav Progressive Socialist Party. On Wednesday he announced the creation of his own party—the Novorossiya (New Russia) Party. “The new party will be led only by those people who in this difficult time showed themselves as true patriots of their Motherland and proved themselves as true fighters and defenders of their Fatherland,” he said in a statement.

Gubarev says elections for a parliament will soon be announced. Other leaders say the elections should be for a president and there are signs of increasing splits in the separatist leadership over joining Russia or being an independent state.

The lack of preparedness by the Donetsk breakaway leaders is reminiscent of the Black Sea peninsula of Crimea in March, when Russian separatist Prime Minister Sergei Aksyonov, a notorious crime boss, waved away trifling questions about technical details concerning government and laws saying all such matters could quickly be resolved by working groups following a vote to secede.

But in Crimea’s case it was clear that the Black Sea peninsula would quickly be folded into Russia and annexed with indecent haste by Moscow. There are signs that Moscow may be having buyer’s remorse now when it comes to eastern Ukraine, preferring the option of keeping Ukraine destabilized and fragmented and eventually transformed into a federation more easily manipulated by the Kremlin. And if Russia doesn’t speedily comply with Monday’s appeal by separatist leaders to annex the oblast, then this Donetsk Republic is likely to last less time than its predecessor.

Separatist inadequacy was stripped away midweek by the Kiev-appointed official regional governor Serhiy Taruta, a successful businessman and Woody Allen look-alike. Unfazed by the 89 percent majority claimed by the separatists in Sunday’s referendum, Taruta quipped, “Behind the two words Donetsk Republic there is nothing of substance.” Speaking to reporters at the plush Donbas Palace Hotel in central Donetsk, he noted the new republic “exists in name only. They have no economic and social programs, no law enforcement.”

But the separatists continue to think they are basking in the glory of their accomplishment. Suddenly nobodies have become somebodies—an ego-inflating, if daunting prospect when you claim to be governing 4.3 million people.

Three days into the life of the fledgling country and separatists dissemble on how far advanced they are in state making. “We have a group of experts working on things now,” says 31-year-old Myroslav Rudenko, who like Gubarev is a history graduate from Donetsk National University. He insists the unrest in eastern Ukraine is homegrown and a mirror image of the Maidan uprising in Kiev that ousted President Yanukovych in late February.

“On the constitution they will come up with a few drafts and we will choose which one to adopt,” he adds. How the selection will be made and by whom, he can’t say. Nor has he any idea what models will form the basis of their thinking. Likewise he is unclear on the legal system or whether the new republic will be a presidential or a parliamentary democracy.

Unless Russia President Vladimir Putin does decide to annex the east, the separatist leaders are on a hook they don’t appear to know how to get off. They are even having difficulty overcoming basic day-to-day problems in the outrageously trashed 11-floor regional administration building they occupy in Donetsk. Leaders are constantly issuing contradictory orders and security commanders are bickering. Recently when a group of separatist gunmen raided an emergency services building in Donetsk and kidnapped a couple of firemen, some leaders complained the action was stupid. “So if we have a fire here, will the firemen come now that we have grabbed some of their people?” one demanded.

Official Donetsk Republic business is frequently log-jammed because the high command has only one stamp for documents and identity papers. A hard-pressed secretary on the 11th floor, the chaotic nerve center of the political leadership, holds it and is faced every day with clamoring groups needing her to stamp papers.

On the outskirts of Slovyansk, a hundred kilometers away, frustration is building among some of the townsfolk. “We never thought we would be in the middle of a battlefield,” says Galina, a 49-year-old mother of two, who has built up a good life in Slovyansk with her advertising executive husband. They have a large, modern house and a café business. But they live on a junction on the outskirts of town in a district that has seen clashes between separatist gunmen and Ukrainian Special Forces.

“We keep our lights off when it gets dark,” says Galina, over tea at the family’s kitchen table. She fusses around hospitably, offering radishes, cucumbers, spring onions—and some delicious cheesecakes. But the atmosphere of domesticity is fragile. Her house has been shot up in firefights and in the background we can hear the occasional report of guns. Outside, her husband lifts his head from working on the family’s vegetable garden.

A few streets away on May 5 a young woman whose sixth-floor apartment overlooks a wood that has become a tug of war between combatants was shot dead by a sniper when she was on the balcony at night and silhouetted by the living room light.

Galina is unnerved by the arrival two days ago on a nearby main road of a large group of heavily armed, camouflaged gunmen who built a formidable checkpoint. She says they are not locals. “I think they are from Crimea, but we don’t look at their faces too much. They act like professional soldiers and were quick and efficient putting up tents and building the block post.” Unlike the often drunken local gunmen manning the main checkpoint entering Slovyansk before a bridge spanning the Torets River, these gunmen search rigorously every car and examine identity documents carefully.

If the drift and danger persist, Galina doesn’t know what the family will do. Many families are leaving but she has relatives in the area and doesn’t want to desert them or her home. Her 14-year-old boy nods vigorously at this. He has been kicking his heels at home for weeks now as local schools are closed. But Galina has had to close her café and lay off the five workers.

Galina and her husband, Vladimir, are the rare citizens of Slovyansk who will speak openly with a Western reporter. Many, when they are approached, nervously wave away the request to comment on what life is like in the separatist-controlled town of Slovyansk in the make-believe state of the Donetsk Republic. They have every right to be self-protective. Russian television outlets hype the danger of spies and the separatists have instructed townsfolk to report anything suspicious, including anyone heard speaking Ukrainian. There have been several abductions and rough interrogations.

As I scribble in my notebook the name of a street near the center of town where taxis are lined up with their drivers forlornly waiting for customers, an old lady approaches and loudly denounces me as a spotter for bombers. “You are a spy,” she screams, waving first her walking stick and then a bunch of dill at me. “You are plotting where our checkpoints are for them to be bombed. American, English, you are the first enemy,” she yells.

“She’s been watching too much Russian television,” says Galina as she offers me another one of her delicious cakes.