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Ukrainian Prime Minister Arseny Yatsenyuk announced Wednesday that the government was cutting funding to areas in the east of the country occupied by pro-Russia separatists.

"Today, to pay money to this area means that the money will not reach the people, it will be stolen by Russian-led guerrillas, and it's nothing else than direct support of Russian terrorism," Yatsenyuk told a government meeting in Kiev, the capital.

For months the central government has failed to pay pensions to residents of the Donetsk and Luhansk regions under separatist control, where mail, electronic communications, trade and banking have been disrupted by armed conflict since April. Those payments to individuals will resume and arrears made up "after Russian-led terrorists flee from the territories," Yatsenyuk said, according to a statement on the government website.

Gas and electricity supplies to the cutoff regions will continue, though, the government chief noted. "These are our citizens there and the government will not allow these people to freeze," Yatsenyuk said of the regions where temperatures are now routinely in the 20s.

Annual subsidies from the central budget for regional government salaries and support of insolvent heavy industries amount to 37 billion hryvnia for the Donetsk region and 19.8 billion hryvnia for Luhansk, a total equivalent to $4.4 billion.

Freezing the government lifelines was an effort aimed at putting economic pressure on the militants where political efforts have failed. Not only do the Kremlin-backed gunmen remain in control of government and security operations in the embattled eastern regions seven months into the conflict, but on Sunday they staged elections for government leaders in their proclaimed "People's Republics" in an attempt to put a stamp of legitimacy on their breakaway states.

Russia's Foreign Ministry expressed its "respect" for the outcome of the votes condemned as destabilizing by the United Nations, the European Union, the United States and international security alliances. That encouragement from Moscow, which committed the first forcible border change since the end of the Cold War when it seized and annexed Ukraine's Crimea region in March, prompted new threats of sanctions against Moscow and its eastern Ukraine proxies.

German Chancellor Angela Merkel told reporters in Berlin that the European Union was reviewing the list of sanctioned individuals from Russia and the occupied eastern regions to add the names of those who played a role in defying international law and the world community's appeal for an end to the attacks on Ukraine's sovereignty and territorial integrity.

"Based on these illegitimate elections, we should look again at the list of particular individuals who bear responsibility in eastern Ukraine, Merkel said, adding that she hoped negotiations to lift existing sanctions could begin but saw no possibility of that happening at the moment.

Russian President Vladimir Putin joined separatist leaders and Ukrainian President Petro Poroshenko in signing a cease-fire agreement in Minsk, Belarus, on Sept. 5 intended to bring an end to fighting that has claimed more than 4,000 lives. But the truce has faltered throughout the two months it has purportedly been in force, with more than 400 deaths among rebels, soldiers and civilians during that time.

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Ukraine cuts funding for east until pro-Russia 'terrorists' retreat