Hundreds of pro-Russian separatists stormed government buildings across one of Ukraine's provincial capitals on Tuesday and opened fire on police holed up in a regional headquarters, a major escalation of the rebellion in defiance of new Western sanctions.

Demonstrators smashed their way into the provincial government headquarters in Luhansk, Ukraine's easternmost province, which abuts the Russian border, and raised separatist flags over the building, while police did nothing to interfere.

As night fell, about 20 rebel gunmen opened fire with automatic weapons and threw stun grenades at the headquarters of the region's police, trying to force those inside to surrender their weapons, a Reuters photographer at the scene said.

"The regional leadership does not control its police force," said Stanislav Rechynsky, an aide to Interior Minister Arsen Avakov, referring to events in Luhansk. "The local police did nothing."

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Pro-Russian protesters attack a pro-Ukrainian protester during a rally in the eastern city of Donetsk. The EU has released the names of more than a dozen new targets of sanctions because of their role in the Ukraine crisis. (Marko Djurica/Reuters)

Separatists also took control of the regional prosecutor's office and television centre in the city, having earlier seized the government headquarters, the photographer said.

The photographer saw separatists inside the prosecutor's office and gunmen guarding the entrance of the television centre.

The gunmen said they were in control of the building, and Interfax news agency said protesters had burned the Ukrainian flag.

Tensions rising in the east

Earlier, protesters demanding more power for Ukraine's regions stormed the government building with baseball bats.

The move further raises tensions in the east, where insurgents have seized city halls, police stations and other government buildings in at least 10 cities and towns.

The demonstrators who overran the building are seeking — at the very least — a referendum on granting greater authority to Ukraine's regions.

Eastern Ukraine, which has a large Russian-speaking population, was the heartland of support for Viktor Yanukovych, the president who fled to Russia in February. The government that replaced him in Kyiv has resisted those demands so far, fearing they could lead to a breakup of the country or mean that more regions — like Crimea — are annexed by Russia.

The storming came as 1,000 demonstrators gathered in front of the building. About 150 people, some masked and wielding baseball bats, broke out of the crowd and charged into the building, meeting without resistance. Later protesters formed a corridor for police who had been inside the building to leave. 

Luhansk, a city of about 450,000, is just 25 kilometres west of the border with Russia. 

Parliament weighs referendum

Regional autonomy is a core issue in the unrest in eastern Ukraine, where insurgents fear the government that took power after Yanukovych will suppress the region's Russian-speakers.

In Kyiv, Ukraine's parliament on Tuesday discussed the possibility of holding a national referendum on whether the country should remain united or become a loose federation that allows the regions more powers. However, no consensus was reached on how such a referendum would be phrased or when it could be held.

Ukraine is already holding a new presidential election on May 25.

Yulia Tymoshenko, a former prime minister who is running for president and whose party dominates the new government, spoke out Tuesday against excessive decentralization.

"While we are giving authority to local administrative bodies, we are obliged — under any circumstances — not to lose authority over the country," Tymoshenko told lawmakers. She asked them to allow local self-governance "but not to lose the possibility of building a whole, unified, governable country, a country that is moving ahead under a strategy determined by all the elites and the people."

Russia masses troops

Russia has massed tens of thousands of troops in areas near the Ukrainian border, feeding concerns that Moscow aims to use unrest in the east as a pretext for an invasion.

In Kyiv, Deputy Foreign Minister Danylo Lubkivsky again accused Russia of fomenting the unrest in Ukraine and said the insurgents it was supporting were violating an international agreement on overcoming the crisis in Ukraine.

"The east, though, still remains a trouble spot, with civilians being threatened and attacked. Russian terrorists are refusing to surrender arms," he told reporters. "They have no real political agenda. They have no political goals and they have no intention of holding any dialogue. They simply execute orders from Russian authorities."

Speaking after a meeting with Lamberto Zannier, chief of the Organization for Security and Co-operation in Europe, Lubkivsky called on the pro-Russia forces to release the hostages they are holding, including a group of OSCE military observers.

Zannier called for the restoration of order throughout Ukraine.

With files from Reuters