Separatist rebels have pressed ahead with a referendum on self-rule in east Ukraine as fighting flared anew in a conflict that could break up the country and pitch Russia and the West into a new Cold War.

A rebel leader said the region would form its own state bodies and army after the referendum, formalising a split that began with the takeover by armed pro-Russian men of government buildings in a dozen eastern towns last month.

There was a near-festive ­atmosphere at some makeshift polling stations but at others altercations broke out between security forces and separatists.

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Last night it was reported one man had been shot dead and a second hurt when the Ukrainian National Guard dispersed a crowd in the eastern Ukraine town of Krasnoarmeisk. Video showed a crowd dispersing under gunfire.

In the southeastern port of ­Mariupol there were only eight polling centres for half a million people and long queues formed.

On the eastern edge of the city, an hour after polls opened, soldiers from Kiev seized what they said were falsified ballot papers, marked with Yes votes, and held two men.

About 160 miles north, clashes broke out around a television tower on the edge of the rebel stronghold of Slaviansk shortly before people began coming out to vote.

"I wanted to come as early as I could," said Zhenya Denyesh, a 20-year-old Slaviansk student. "We all want to live in our own country." Asked what would follow the vote, he replied: "It will still be war."

Western leaders threatened more sanctions against Russia if it continued what they regard as efforts to destabilise Ukraine. Some modest measures may come as soon as Monday, limited by EU reluctance to upset trade ties with Russia.

Moscow denies any role in the fighting or ambition to absorb the Russian-speaking east of Ukraine, into the Russian Federation.

It annexed the Black Sea peninsula of Crimea after a referendum in March.

Ukraine's Interior Ministry called the referendum a criminal farce with ballot papers "soaked in blood".

Ballot papers in Luhansk and Donetsk, which has declared itself a "People's Republic", were printed without security provision, voter registration was patchy and there was confusion over what the vote was for.

Engineer Sergei, 33, in Mariupol, said he would answer "Yes" to the question in Russian and Ukrainian on the ballot: "Do you support the act of state self-rule of the Donetsk People's Republic?"

"We're all for the independence of the Donetsk republic," he said. "It means leaving that fascist, pro-American government [in Kiev]."

But in the same queue, 54-year-old Irina said a Yes vote endorsed autonomy within Ukraine. "I want Donetsk to have … some kind of autonomy, separate from Kiev. I'm not against a united Ukraine, but not under those people … who seized power," she said.

The Ukrainian government came to power when President Viktor Yanokovich was toppled in February by mass protests in Kiev.

Others see the vote as a nod to absorption by Russia.

Rebels hope to have the ballots counted by this afternoon. Results are likely to show a large Yes vote, and one separatist said they would move fast with the next step.

"Troops on our territory after the official announcement of results will be considered illegal," said Denis Pushilin, a leader of the self-styled Donetsk republic.

Meanwhile, Ukraine's leader Oleksander Turchinov has urged political leaders to join a round-table discussion on devolution in Ukraine, but will exclude rebels he has branded "terrorists".

Serhiy Pashinsky of the Ukrainian presidential administration said Ukrainian forces had destroyed a separatist base and checkpoints around Slaviansk. "This is not a referendum. This is a desultory attempt by killers and terrorists to cover their activity," he said.

Yesterday's vote went ahead despite a call by Russian President Vladimir Putin on Wednesday to postpone it.

Mr Turchinov, who has ruled the referendum illegal and dismissed allegations the Kiev authorities are neo-fascists, said on Saturday any move to secession would be "a step into the abyss".