In the middle of the church were two open coffins. Inside them the bodies of Artyom Zhudov and Alexei Sharov, two young men aged 24 and 19. An orthodox priest in magenta robes sang the liturgy. Mourners carried red carnations. The scene was sombre: candles, the flickering images of saints, a woman's sob. Outside a light snow fell.

Sharov and Zhudov were shot dead last Friday in the eastern Ukrainian city of Kharkiv. They were victims of, a clash between pro-Russian youths and far-right Ukrainian nationalists. The details are sketchy: a minivan full of men assaulted a pro-Russian crowd; the crowd, including Zhudov and Sharov, followed the vehicle to the offices of the Patriots of Ukraine, a murky far-right group. Shots were fired, the young men were hit.

The encounter appears to confirm the Kremlin's version of the Ukraine crisis. According to its scenario, ultra-nationalists seized power in Kiev last month, compelling Moscow to "protect" Crimea and its Russian majority. Meanwhile, fascists have been attacking ethnic Russians in the south and east of Ukraine, close to the Russian border, especially in the febrile Russian-speaking eastern cities of Kharkiv, Donetsk and Luhansk, it says.

The big question is whether such confrontations in eastern Ukraine will prompt further Russian "protective" measures. Dmitry Peskov, Vladimir Putin's press spokesman, told the BBC that Russia was not planning to invade the east. At the same time, however, Peskov explicitly warned that Moscow reserved the right to "protect Russians and Ukrainians" there if the situation gets worse.

According to civil rights groups, however, the Kremlin's account of anti-Russian persecution is a dark fairytale – "entirely fictional", as one put it. It is, they say, a made-up scenario scripted in Moscow for state TV, and now played out on the ground by pro-Russian activists and bussed-in professionals. Russian propaganda has been extremely effective, they add. Many trust Russian state TV rather than what they see on the streets, which are strikingly bereft of fascists.

"There's no discrimination against Russian-speakers actually," Yevgeny Zakharov, from Kharkiv's human rights protection group, said earlier this week. Zakharov said support for the idea of Kharkiv following Crimea and joining Russia was low – 15% according to the latest survey. He believes last week's bloody shoot-out was deliberately provoked. "This [Kremlin] campaign is being conducted very aggressively. The idea is to give the false impression that Russians are being humiliated and Kharkiv wants union with Russia," he said.

Kharkiv is Ukraine's second biggest city. It is home to more than 1.5 million. Between 1917 and 1934 it was the capital of Soviet Ukraine. With its vast cobbled square, sweeping neo-classical Stalinist architecture, and tank and aviation works, Kharkiv has something of the feel of a communist theme park. But it is also a cosmopolitan centre of learning. It has a university and thousands of students, including some from western Ukraine. There is a towering cathedral, now used as a concert hall, and an oligarchic hotel.

Zakharov said the debate in the heady days following Ukraine's revolution was about what to do with Lenin's statue. Supporters of the pro-European Maidan movement in Kiev had been gathering in the park next to a rival monument to Taras Shevchenko, Ukraine's national poet. As events reached fever pitch in Kiev, they moved to the square with a view to dismantling Lenin. They daubed him in graffiti. Quickly, however, anti-Maidan protesters defended the statue, with tents and a vigil. Their counter-symbol was an orange-and-black ribbon; it marks the Soviet 9 May Victory Day over fascism.

Wounded supporters of Ukraine's new government after clashes with pro-Russian protesters. Photograph: Stringer/Reuters

This stand-off continued for over a week. Then, on Saturday 1 March, mass pro-Russian protests erupted in 11 Ukrainian cities. According to Zakharov, these pan-Ukrainian rallies were carefully co-ordinated. In Kharkiv "20 to 40 buses" from the nearby Russian city of Belgorod arrived in the centre. They delivered hardcore Kremlin activists, he said, some dressed in military-style fatigues. They waved Russian flags and cried: "Russia, Russia".

The new government in Kiev alleges these visitors are paid provocateurs. It calls them "tourists". Together with local thugs, the "tourists" stormed the main administrative building, at the opposite end of the square, and evicted the Ukrainian nationalists who had been occupying it, brutally beating several of them. A student blogger from Moscow replaced the Ukrainian flag on the roof with a Russian one. (He posted video and photos of his exploits on social network site LiveJournal.) Police later took down the flag and restored the Ukrainian one.

Andrei Borodavka, a Kharkiv journalist and anti-Maidan activist, admitted "around 200" Russian citizens had been bussed in from across the border. But he said these weekend visitors were no different from US and EU politicians who flew in to support the Maidan. Borodavka said the vast majority of those protesting were locals, unhappy about what they regarded as the illegitimate seizure of power in Kiev by western-backed Ukrainian extremists – the same view as the Kremlin's.

Borodavka added that those opposed to Kiev wanted to protect Lenin because he was a part of the city's cultural fabric. "We don't want to preserve him as a historical personality," he said. "But Lenin is the place where you meet girls for a date. Or where you go after your school graduation. Newly-weds visit Lenin too. He's in our memories." Borodavka said he didn't want Russia to absorb eastern Ukraine, but did want the country to become a federation, with greater regional autonomy.

Last Sunday, as Crimeans voted in a "referendum", there was further unrest. About 1,500 protesters took to the streets. They unfurled a giant 100 metre long Russian tricolour. [https://www.youtube.com/watch?v=u3g9cF-aBQY&list=UUToIylCh0DGAT4nc2JTEe2g] and tore down the Polish and EU flags from the Polish mission.

The crowd ended up outside Kharkiv's Russian consulate – a renovated 19th-century house at the end of Olminskogo, a boulevard of poplar trees colonized by puffy balls of mistletoe.

Flanked by two men in leather jackets, a local engineer, Yegor Loginov, shouted into a loudspeaker a prepared text scrawled in blue pen on a sheet of A4. He called on the Russian Federation and "Putin personally" to send "peace-keeping forces" to defend Kharkiv. "We don't recognise power in Kiev," Loginov said. There were cries of"Putin save us". Russian TV filmed his address – a treasonous appeal, from Kiev's point of view, to a belligerent foreign neighbour.

Pro-Russian supporters burn the scarf of a radical Ukrainian ultra-nationalist group in Kharkiv. Photograph: Sergei Chuzavkov/AP

Among those opposed to Putin's carve-up of Ukraine, the mood is gloomy, verging on apocalyptic. They agree his immediate goal is to destabilise Ukraine, sabotage its new government and thwart presidential elections set for 25 May. The first step, annexation of Crimea, is over. Moscow is now demanding Ukraine's federalisation – a possible prelude to a Yugoslavia-style breakup.

Ivan Varchenko, a deputy in Kharkiv's regional parliament, and a member of Yulia Tymoshenko's Batkivshchyna party, said the Kremlin's information war had been brutally penetrating. "It's in the style of Goebbels. They say that Ukrainian nationalists drink the blood of Russian-speaking babies. The worse thing is that people believe what they see on TV." To those who want to join Russia, he said: "I'll buy you a ticket."

A pro-Russian protester is beaten by supporters of the Ukrainian government in Kharkiv. Photograph: Stringer/Reuters

Varchenko said the chances of Ukraine defeating a further Russian military incursion were practically zero. "Over the years our army has fallen apart," he admitted. He added: "I'm willing to fight. A century ago we had the first world war. Seventy years later the second. Russia is doing everything it can to start world war three."

The road from Kharkiv to the Russian border is eerily quiet: a 40km ride along the E105 highway, past small forests and snow-covered fields. There isn't much evidence the Ukrainian military is preparing for battle. There is one tank, dug in immediately next to the road, with a yellow-and-blue flag flying from the turret, and a handful of armoured personnel vehicles. Moscow claims that tens of thousands of ethnic Russians have fled Ukraine in panic. There is no sign of any refugees, either.

Residents in the village of Kozacha Lopan – a dilapidated smuggling zone of 700 souls, next to a railway line – said war between Ukraine and Russia was inconceivable. Almost all had relatives in Russia. Tatiana Dudarieva, a headteacher, said her husband commuted over the border to Belgorod every day. "We don't do revolution. We teach children," she said. Tatiana, like others, has a mixed identity: she speaks Russian, lives next door to Russia, but considers herself Ukrainian and supports Ukraine's territorial integrity.

Deputy headteacher Oleg Tutunnik is bemused by the country's sudden bifurcation. "Ten years ago there was no distinction between east and west. We would take school groups to the Carpathian mountains," he said. "The situation has changed. We don't understand it." The deputy mayor, Alexander Ruban, also ruled out fighting. "There won't be a war. It would be a fraternal war. We want peace," he said.

Riot police guard a government building in Kharkiv on 16 March during a pro-Russian demonstration. Photograph: Stringer/Reuters

In the runup to Crimea's annexation, Russia conducted large-scale exercises just over the border. Video posted on Youtube shows a long column of armoured vehicles trundling serenely through suburban Belgorod. Tanks, transporters and equipment are all in place should an order come from Moscow to advance down the road towards Kharkiv.

European diplomats in Kiev fear Putin's irredentist adventure isn't over yet. One said: "Russia has completed massive preparations for an all-out invasion. Whether they will execute it is still unclear. Unfortunately I don't see factors that would deter them from doing so. Their propaganda gear is on uncompromising confrontation with the entire western world now, and they expect no real consequences."

The threat of war has had a sobering effect on Kharkiv's political elite. The mayor, Hennadiy Kernes, was a leading figure in Yanukovych's Russian-leaning Party of Regions. He has faced long-standing allegations of corruption. A populist who provided the city with playgrounds and municipal benches, Kernes had previously supported closer ties with Moscow. He bitterly attacked the Maidan, siding with the defenders of Lenin's bronze statue.

Now, under house arrest but still in a job, he claims he was himself a victim of Yanukovych's corrupt system. His recent statements have grown distinctly more pro-Ukrainian. Critics say this is because he and other oligarchs realise that in the event of a Crimea II Russian takeover in the east – Ukraine's industrial heartland – they are likely to lose all their assets. Mikhail Dobkin, meanwhile, the governor of Kharkiv province, has been sacked and faces charges of separatism.

It is a moot point how closely the Yanukovych regime is linked to shadowy pro-Russian forces, who appear to be following orders from Moscow. The leading group in this movement is Oplot, a sporting fight club. Its video channel features recent protests and documentaries lambasting the west, taken from Russian TV. Its leader, Eugene Zhilin, is a former militiaman. He has served time for armed robbery. Oplot has been linked to the unsolved 2010 disappearance of journalist Vasyl Klymentyev. Surprisingly, Borodavka admits that the FSB – the KGB's successor agency – has been active. "Yes, the FSB plays a role in supporting pro-Russian groups. But the most important vector is the Russian media," he said.

The funeral of Zhudov and Sharov took place in Kharkiv's red-and-cream Panteleimon church. The first Russian journalist to arrive was from Lifenews.ru, the Kremlin's favourite news website. Other cameras perched on the steps of the baroque altar. The deaths of two young Russian-speakers, at the hands of Ukrainian fascists, formed a powerful tableau. It may yet spark a war. The next few weeks will show whether this is Ukraine's Franz Ferdinand moment.