KIEV — Ukraine's government said Wednesday it would cut off all transport connections with Russian-backed separatist territories in the country’s east, potentially undermining a fragile ceasefire and jeopardizing the country's tentative economic recovery.

The announcement was made at a special meeting of the country’s security and defense council with President Petro Poroshenko, and represents a dramatic hardening of the government's position. Only humanitarian traffic will be allowed — cutting off flows of goods and people that had persisted despite almost three years of a war that has taken 10,000 lives.

Russian Foreign Minister Sergei Lavrov denounced the decision. "This runs counter to common sense and human conscience," he was quoted as saying by to the Tass news agency.

Kiev blamed rebel seizures of Ukrainian businesses for the move.

Rebels said last week that they had "nationalized" holdings owned by Rinat Akhmetov, Ukraine's richest man, and other oligarchs. On Wednesday, Akhmetov's DTEK energy company said it had lost control of its main assets in the insurgent-held territories in the east.

“This means the shutdown of companies that would affect the Ukrainians on both sides of the contact line,” DTEK CEO Maxim Timchenko said in a statement. “This would result in significant reduction of income and rise in unemployment."

Stopping traffic

Dozens of activists have been blocking four railroad junctions since the end of January, preventing coal from the self-declared Donetsk and Luhansk “People’s Republics” from traveling west into government-controlled areas, and, at the same time, stopping iron ore and other inputs for the steel industry from reaching factories in rebel-controlled territory.

This week, Kiev seemed to be moving to end the blockade — dismantling one of the blockaders' base camps and detaining more than 40 activists, who were later released.

But even that tentative step unleashed nationalist protests in Kiev. Small demonstrations broke out in the capital and other cities to protest the government's use of force. Protestors attacked a Kiev outlet of the Russian-owned Alfa Bank and Akhmetov’s offices in the capital, and sealed shut the entrance to another Russian bank, Sberbank, with bricks and motor.

"The Ukrainian economy is unfortunately obliged to suffer” — Iegor Soboliev, blockade organizer

Wednesday's announcement appears to show a shift in government policy, but the blockade leadership greeted the news cautiously. "I will propose to the blockaders that we supervise the implementation of the government's decision," Iegor Soboliev, an organizer, told POLITICO. "But until the blockade is fully established by the police and national guard, it's too risky and not efficient to [dismantle our camps]."

The blockade’s leaders, a mix of nationalists and Western-leaning reformers, said they have two goals: to force the release of Ukrainian political prisoners and POWs held in the east and in Russia, and to bring an end to all trade with Russia and the breakaway territories.

“We have to defend ourselves from the Russian invasion — an invasion not just on the military field, but also in social structures, political structures, the media and economy,” said Soboliev, who is a member of the Samopomich, or Self-Reliance, party.

“We are proposing an economic war against Russia — but this is an answer that every nation should give to an invader,” he said. “This is a very painful policy that we are proposing, but we have no other options. The Ukrainian economy is unfortunately obliged to suffer.”

Limiting trade ties with the separatists republics would also increase the cost to Moscow, which would be obliged to spend more to prop them up.

'Trading with the enemy'

Cutting links with Russia is also a priority for Ukrainian policymakers in the energy sector.

"Our energy independence is of peculiar importance to our country," Volodymyr Groysman, the country’s prime minister, said last week, according to the government’s website.

Ukraine buys no gas directly from Russia, relying for its energy on nuclear power and on coal. But the blockade now threatens access to coal, accounting for about a third of Ukraine's energy mix, most of which comes from separatist-controlled regions.

Groysman declared an energy state of emergency last month, and officials warn rolling blackouts could start in some areas by the end of March.

The government is treading a fine economic and political line.

Ukraine can't really afford to turn its back on the $1.7 billion in Russian investment that flowed into Ukraine last year. Russia is also a significant, albeit declining, trade partner. And Kiev runs a risk if it cuts off the Donbas completely and alienates its population, making any future reintegration of the separatist region more difficult .

But trading with the breakaway republics while Ukrainian troops exchange fire with Russian-supported fighters is also politically unpalatable.

The blockade lays bare for some Ukrainians the contradictions and hypocrisies of the conflict. “In the end, there is a real anger of ‘Why are we trading with the enemy?’” said one Western official, who spoke on condition of anonymity. “There is a real sense of ‘No, we need to cut this off.’”

Kalina Oroschakoff contributed reporting.