Pro-Russia separatists in eastern Ukraine say they have completely surrounded the strategic town of Debaltseve, a claim denied by the Ukrainian army who insist the fighting is ongoing.

The self-proclaimed Donetsk People’s Republic (DPR) on Tuesday said its fighters have cut off the main supply road into the government-held town – which is in between the separatist hubs of Luhansk and Donetsk.

The route had also been used as a humanitarian corridor in recent weeks, allowing civilians to flee the fighting.

Al Jazeera’s Charles Stratford, reporting from the nearby town of Yanovka, spoke to a separatist military commander who supported the rebels’ claims.

“We have just spoken to a rebel separatist commander who tells us Debaltseve is completely surrounded by separatists. As he understands it the separatists are not in the town, the Ukrainian military are still inside,” he said.

“The military are denying this, saying there are ongoing battles on the main supply route out of the city. We were on that supply route yesterday and the Ukrainian military we saw were in a state of disarray.

“They wanted us out immediately and were pulling back their heavy weaponry.

“The situation is very fluid and there is no direct contact with the separatist fighters.”

Major rail hub

Debaltseve is of great strategic importance to both sides in the conflict as it is the site of a major rail hub that connects the rebel-controlled DPR with Russia.

“We have spoken to separatist commanders in recent weeks and they have said they are not interested in pushing for peace until they have taken the town,” our correspondent said.

“There is a greater sense of confidence now among the separatists, whereas the general atmosphere among the Ukrainian troops is one of panic, especially on that main supply route.”

Separatist fighters from the DPR urged Ukrainian forces to surrender and leave the Debaltseve trap peacefully, said spokesman Eduard Basurin.

“We guarantee security to all who lay down their arms. The others will be eliminated. If the enemy attempts to attack in another place, the strike will be repelled. Some 5,000 – 6,000 Ukrainian servicemen have been trapped in Debaltseve,” Basurin said.

Ukraine’s military said no reports had confirmed the rebels’ claims that the town was encircled.

“Fighting is on to control the Artemnivsk-Debaltseve motorway, where a military confrontation continues,” military operation spokesman Andriy Lysenko told Interfax on Monday evening.

Ukrainian President Petro Poroshenko said on Tuesday that Russian-backed fighters had launched an artillery strike on the town of Kramatorsk, which is more than 50km (30 miles) away from the front line.

Poroshenko said the first round of rocket fire hit the headquarters of the Ukrainian command in eastern Ukraine and the second landed in a residential area.

The government-controlled Donetsk regional administration said seven people were killed, while 16 people were injured in the residential area and 10 more at the military headquarters.

Russian military exercises

About 2,000 Russian reconnaissance troops have started exercises in southern Russia, Interfax news agency reported on Tuesday, a day before a summit on the Ukraine crisis in the Belarussian capital Minsk.

Al Jazeera’s Rory Challands, reporting from Moscow, said it was a tactical move on Russia’s side.

“It is an elementary negotiating strategy. What we are seeing are timely reminders of Russia’s military strength,” he said.

“The exercises are not particularly big, but the locations are significant as there are also 600 troops with 50 tanks on exercise in newly acquired Crimea.”

Ukraine’s Azov regiment has also announced it will be launching an offensive against the Donetsk city of Novoazovsk.

Azov battalion said on social media on Tuesday that it had captured several villages northeast of the strategic port of Mariupol, pushing the rebels closer to the border with Russia.

However, rebel military spokesman Eduard Basurin said in a televised news conference that the rebels have not retreated.

Azov said rebels had shelled the village of Kominternove, east of Mariupol, causing unspecified civilian casualties. An Associated Press reporter at a government check-point between there and government-controlled Mariupol was told of ongoing fighting several miles away.

“The Minsk talks are happening tomorrow and what we have is jostling for position ahead of the peace talks,” Challands said. Al Jazeera