Sitting in a chandeliered ballroom of the five-star Donbass Palace Hotel – long the poshest address in this economically depressed region – Serhiy Taruta tried to assure the assembled media that nothing had changed following a separatist-run referendum, the declaration of an independent Donetsk People's Republic and fresh violence.

In Mr. Taruta's reality, Donetsk remains part of Ukraine and he is the region's legal governor, appointed by the central government in Kiev. "The Donetsk People's Republic does not exist," the billionaire steel-magnate-turned-politician said. He dismissed a Sunday referendum – in which separatist leaders say 89 per cent of voters supported their declaration of sovereignty – as a meaningless "opinion poll."

Less than a kilometre away, inside a regional government office that Mr. Taruta hasn't set foot in since pro-Russian rebels seized it on April 6, the separatist leaders set about trying to prove the Donetsk People's Republic did exist, by issuing a series of decrees Tuesday, including the announcement that they would raise an army. The government building is now surrounded by a wall of tires and razor wire, with access controlled by gunmen in camouflage.

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Inside, Denis Pushilin, an alleged-con-man-turned-political-leader of the separatists, said the region is now in civil war. He said the Ukrainian military "should either come to the side of the republic, or leave" the Donetsk region.

Neither Mr. Taruta nor Mr. Pushilin can claim to rule either the city of Donetsk, or the wider region, which is home to some 4.5 million people. Control of a city, building or roadblock can shift from hour to hour, with the Ukrainian army and separatist forces – and sometimes mysterious third parties – using hit-and-run tactics that suggest they lack the resources to take and hold new ground.

Seven Ukrainian soldiers were killed – the largest loss of life suffered by the army on a single day since the uprising began last month – when pro-Russian forces ambushed their armoured column on a bridge near the flashpoint city of Kramatorsk, north of Donetsk, on Tuesday. The Ukrainian Ministry of Defence said the column was attacked by more than 30 "terrorists," who used rocket-propelled grenades to destroy two armoured personnel carriers. Seven other soldiers were injured.

A national election scheduled for May 25 looms as a test of strength in the region, with Mr. Taruta saying Tuesday that the vote can and must go ahead, and Mr. Pushilin vowing the election will not be held in Donetsk. The election, the first to be held since pro-Western crowds ousted the Moscow-backed government of Viktor Yanukovych, is seen as crucial for Ukrainian unity.

In other violence, pro-Russian separatists in the neighbouring region of Lugansk said their leader, Valery Bolotov, survived an apparent assassination attempt when he was shot while driving in his car.

The fighting came as separatist leaders in Donetsk and Lugansk began negotiations aimed at creating a unified pro-Russian entity. Lugansk separatists also declared sovereignty on Monday after claiming 96-per-cent support in their own referendum. Like the Donetsk referendum, the vote has been scorned in Kiev and Western capitals as illegitimate.

Russia, however, has said it "respects the will of the population of the Donetsk and Luhansk regions."

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The separatists said their plan was still evolving. "It seems we're going to unite with the Lugansk region. Maybe [the neighbouring region of] Kharkiv will have a referendum too. Then we will not be just some rebel regions, but a huge part of ex-Ukrainian territory," Donetsk People's Republic spokesman Alexander Shilov told The Globe and Mail. Many in Donetsk want eventual union with Russia, he said, but "Rome wasn't built in a day."

The Kremlin has yet to respond to Monday's appeal from Mr. Pushilin for Donetsk to be absorbed into the Russian Federation. Moscow annexed the southern region of Crimea in March, following a controversial referendum there.

Tuesday's flurry of activity by the Donetsk People's Republic included an appeal to the United Nations for recognition.

Interim Ukrainian President Oleksandr Turchynov, however, has said the operation against "terrorists" in the east of the country will continue, and that his government will not negotiate with the separatist leaders that he claims get their orders from Moscow.