Ukraine Rebels Disavow Ceasefire At Encircled Town

(Reuters) - Ukraine's rebels disavowed a new truce on Sunday hours after it took effect, saying it did not apply to the town where most fighting has taken place in recent weeks.

Guns fell abruptly silent at midnight across much of eastern Ukraine in line with the ceasefire agreement, reached after a week of marathon diplomacy led by France and Germany.

But pro-Russian rebels announced they would not observe the truce at Debaltseve, where Ukraine army forces have been encircled.

"Of course we can open fire (on Debaltseve). It is our territory," Eduard Basurin, a senior rebel commander, told Reuters.

"The territory is internal: ours. And internal is internal. But along the line of confrontation there is no shooting."

It was unclear what impact that disavowal would have across the battle zone, where the emphasis was mostly on ensuring the truce would stick. Both sides said their forces had stopped shooting and blamed what firing there was on the enemy.

Kremlin spokesman Dmitry Peskov said the truce must be implemented "unconditionally" as agreed on Thursday, but made no mention of whether Moscow believes the ceasefire applies to Debaltseve. He declined to comment on Basurin's remarks.

Reuters journalists in nearby towns heard volleys of artillery from the direction of Debaltseve in the morning after a night that had been mostly quiet.

Ukrainian forces have for weeks been holding out in the town, which sits astride a railway junction in a pocket between the two main rebel strongholds.

Rebels say they have completed the encirclement of the town, leaving it effectively in their hands. But Ukraine says its forces are still inside and have kept open a road to resupply it in the face of a Russian-backed onslaught.

"In the past 24 hours, a mobile group of pro-Russian fighters under the support of artillery fire continuously tried to encircle Debaltseve," Kiev military spokesman Andriy Lysenko said. Ukrainian forces foiled their plans, he said.

Washington says Russia's regular military, armed with tanks and missile launchers, carried out an operation in the days before the truce to encircle Debaltseve.

Reuters journalists operating on the rebel side have seen armored columns of troops without insignia arriving in the area in recent days.

Elsewhere in eastern Ukraine the ceasefire was met by abrupt silence at midnight. Reuters journalists in Donetsk, the main rebel stronghold, said artillery bombardment halted and they heard no firing overnight, after intense final hours before the ceasefire when shells had exploded every few seconds.

A Reuters photographer in government-held territory also said constant bombardment had halted overnight, although he heard a volley of artillery around 7 a.m. from the direction of Debaltseve.

The Ukrainian military said on Sunday morning that the ceasefire was being "generally observed". Its forces had been shelled 10 times since the truce took effect in "localized" incidents. Nine of its soldiers were killed on Saturday but none since the truce took effect, a spokesman said on Sunday morning.

Hennadiy Moskal, the head of the Kiev-controlled administration for Luhansk, one of the rebellious provinces, said most hot spots had been quiet but a complete ceasefire had not come into effect.

A Ukrainian staff officer stationed near Debaltseve said: "The general level (of attacks) has decreased, although there are violations."

Ukraine's President Petro Poroshenko, wearing the uniform of the armed forces supreme commander, said in a midnight televised address in the capital Kiev that he had ordered troops to stop firing in line with the truce. He said there was still alarm over the situation around Debaltseve.

The ceasefire, negotiated in all night four-power talks on Thursday, foresees creation of a neutral buffer zone and withdrawal of heavy weapons. More than 5,000 people have been killed in a conflict that has caused the worst crisis in Russia-West relations since the Cold War.

"NEW RUSSIA"

Russian President Vladimir Putin denies Moscow is involved in fighting for territory he calls "New Russia" but Washington and its allies have imposed economic sanctions over Russia's role in the conflict.

Poroshenko said that if Ukraine were slapped once, it would not offer the other cheek. But, seated alongside armed forces chief of staff Viktor Muzhenko, he added: "I very much hope that the last chance to begin the long and difficult peaceful process for a political settlement will not be wasted."

In the hours leading up to the ceasefire, heavy artillery and rocket fire roughly every five seconds had reverberated across Donetsk, the main regional city in the east which is under the control of the secessionists.

Ukrainian authorities said two civilians were killed by shells that hit a town minutes past midnight.

U.S. Secretary of State John Kerry urged implementation of the ceasefire in a telephone call with his Russian counterpart Sergei Lavrov and expressed concern about efforts by Russia and the separatists to cut off Debaltseve.

U.S. President Barack Obama expressed "deep concern" about the violence around Debaltseve prior to the ceasefire, in a telephone call with Poroshenko, the White House said. Obama also spoke to German chancellor Angela Merkel, who negotiated the ceasefire along with President Francois Hollande of France at all night talks with the leaders of Ukraine and Russia.

The Kremlin said the four leaders who negotiated the truce would continue to speak by phone.

Maxim, a rebel fighter at a checkpoint on a road from Donetsk to government-held Dnipropetrovsk, told Reuters it was indeed quiet but he did not expect the ceasefire to hold.

"Truce? I doubt it. Maybe 2-3 days and then they will start shooting again. This is all for show. The OSCE is driving around here, so of course they are being quiet," he said. The Organization for Security and Cooperation in Europe has monitors to observe the truce.

(Additional reporting by Alessandra Prentice, Serhiy Karazy and Pavel Polityuk, Vladimir Soldatkin in Moscow, Jeff Mason in Rancho Mirage, California, and Michelle Nichols in New York; Writing by Peter Graff; Editing by Jon Boyle)