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Kyiv says it has lost control of eastern Ukraine as IMF approves $17B loan

More buildings seized by pro-Russian groups as International Monetary Fund approves loan aimed at stabilizing country

Ukraine’s acting president has admitted that his government in Kyiv does not have control over the eastern part of the country, where pro-Russian militia groups have seized government buildings, as Russian diplomats denied charges by Western counterparts that Moscow was behind the ongoing unrest.

Pro-Moscow separatists seized government offices in more Ukrainian towns on Wednesday, in a further sign that authorities in Kyiv have lost control of the country's eastern industrial heartland bordering Russia.

Oleksander Turchynov, Ukraine's acting president until a May 25 election, said that police were incapable of reasserting control in the region and that Ukraine's armed forces were on full alert for a Russian invasion.

That prompted a return volley from Moscow, with the Foreign Ministry demanding that Kyiv "immediately cease the bellicose rhetoric, which is aimed at intimidating its own population.”

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Amid Wednesday's heated rhetoric, the International Monetary Fund approved a two-year, $17 billion loan package for cash-strapped Ukraine as it seeks to regain stability following Russia's annexation of Crimea and continued turmoil in the east.

The IMF aid will allow the immediate disbursement of $3.2 billion to Kyiv and unlock further credits from other donors worth about $15 billion, intended to help Ukraine stabilize its economy in the middle of its worst civil unrest since the country gained independence in 1991.

The IMF assistance, pledged in March, is hinged on economic reforms in Ukraine, including raising taxes, freezing the minimum wage and raising energy prices. While the move is aimed at stabilizing the country, austerity measures could hit households hard and strain the interim government's already tenuous hold on power.

In other developments, Ukraine on Thursday said it had detained Russia's military attaché to Kyiv on suspicion of spying and ordered him to leave. Ukraine accuses Russia of orchestrating the fall of towns and cities across its industrial east to pro-Russian separatists over the past month, spearheaded by well-organized gunmen in masks and military fatigues.

Attempts to contain the insurgency by the government in Kyiv have proved largely unsuccessful, with security forces repeatedly outmaneuvered by the separatists.

Gunmen who turned up at dawn on Wednesday took control of official buildings in Horlivka, a town of almost 300,000 people, said a Reuters photographer. They refused to be photographed.

The heavily armed men wore the same military uniforms without insignia as other unidentified "green men" who have joined pro-Russian protesters with clubs and chains in seizing control of towns across Ukraine's Donbass coal and steel belt.

Some 30 pro-Russian separatists also seized a city council building in Alchevsk, farther east in Luhansk region, the Interfax-Ukraine news agency said. They took down the Ukrainian flag and flew a city banner before allowing workers to leave.

Daniel Baer, the U.S. ambassador to the Organization for Security and Cooperation in Europe (OSCE), a European security watchdog that has monitors in the region, told reporters in Vienna: "I think it's very clear that what is happening would not be happening without Russian involvement."

A police official in Donetsk, the provincial capital where separatists have declared a "People's Republic of Donetsk,” said separatists were also in control of the Horlivka police station, having seized the regional police headquarters earlier in April.

Wednesday's takeovers followed the fall of the main government buildings on Tuesday in Luhansk, capital of Ukraine's easternmost province, driving home just how far control over the densely populated region has slipped from the central government in Kyiv.

"They've taken them. The government administration and police," the police official said of Horlivka.

The town sits just north of Donetsk, unofficial capital of the Donbass region, where mainly Russian-speaking separatists have called a referendum on secession for May 11. Many hope to follow Crimea's break from Ukraine in March and subsequent annexation by Russia.

The Donbass region is home to giant steel smelters and heavy plants that produce up to a third of Ukraine's industrial output. An armed uprising began there in early April, with Kyiv almost powerless to respond for fear of provoking an invasion by tens of thousands of Russian troops massed on the border.

On Wednesday, Russian Foreign Minister Sergey Lavrov said, however, that Russia would not "do stupid things" in response to Western sanctions.

Describing a phone call between President Vladimir Putin and British Prime Minister David Cameron, the Kremlin said they agreed that only "peaceful means" could resolve the conflict — although Putin has shown little sign of backing down in the face of sanctions.

In Germany, Chancellor Angela Merkel said she ruled out any military solution to the conflict over Ukraine, which is sandwiched between Russia and the U.S.-led NATO bloc.

"Would we have learned anything 100 years after the start of World War I and 75 years after the start of World War II if we resorted to the same methods? No," said Merkel, who will visit President Barack Obama on Friday.

Many Russian-speaking business "oligarchs" from the Donbass backed former President Viktor Yanukovych and exercise great influence over the region.

On Wednesday, the most powerful of these, Ukraine's richest man, Rinat Akhmetov, issued a formal statement saying he remained committed to his investments in the Donbass and to keeping the region as part of Ukraine.

Al Jazeera and Reuters

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