The retreat Wednesday of Ukrainian soldiers from the city of Debaltseve was a major defeat for the Kiev regime in its military offensive against pro-Russian separatists in the eastern Donbass. It was also a blow to US policy in Eastern Europe.

The loss of Debaltseve has underscored the bankruptcy of the US puppet regime in Kiev and the lack of popular support for military operations against ethnic Russians in the east.

Ukrainian President Petro Poroshenko announced Wednesday that he had ordered a “planned and ordered” withdrawal of Ukrainian troops from the battered transit hub. The New York Times reported that a column of approximately 100 transport trucks ferried soldiers out of Debaltseve early in the morning. The convoy came under intense fire from separatist tanks and snipers as it made its way toward the government-held city of Artemivsk, approximately 45 kilometers to the northwest.

Ukrainian Defense Ministry spokesman Andriy Lysenko reported that a majority of the estimated 8,000 Ukrainian soldiers who had been trapped in the city had escaped. “At the moment, almost 80 percent of the Ukrainian units have retreated from this sector and this operation is to be completed soon,” he told reporters.

The head of the separatist Donetsk People’s Republic, Aleksandr Zakharchenko, had called on the encircled soldiers to lay down their weapons and surrender ahead of last Sunday’s cease-fire deadline.

In the lead-up to the cease-fire negotiated in Minsk last week, several thousand Ukrainian troops entrenched in the city had been surrounded by separatist militias. Fighting continued in Debaltseve after the cease-fire deadline, as the separatists sought to force a complete surrender by the Ukrainian forces.

German Chancellor Angela Merkel and French President Francois Hollande launched a last-ditch diplomatic effort last week, securing a cease-fire after it was reported that US President Barack Obama was moving toward a decision to arm the Kiev regime with lethal military equipment, including anti-armor missiles, raising the specter of war between NATO and Russia.

Speaking from Hungary on Tuesday, Russian President Vladimir Putin called for the Ukrainian troops in Debaltseve to give up their weapons and for the separatists to allow them to return home. He downplayed the significance of the fighting and called for the cease-fire he negotiated with Germany and France to be “implemented in full.”

American officials have seized on continuing hostilities following Sunday’s cease-fire deadline to press for an escalation of economic and military pressure on Russia. US State Department spokesperson Jen Psaki stressed at a press briefing Tuesday that the delivery of American weaponry to the Kiev regime remained “on the table.”

Ashton Carter, who was sworn in as Obama’s new secretary of defense on Tuesday, openly backed the arming of the Ukrainian regime at his Senate confirmation hearing earlier this month. He told the Senate Armed Services Committee that he was “very much inclined” to support a plan for delivering lethal weapons. Carter insisted that the US needed to “support Ukraine in defending themselves.”

US Senators John McCain and Lindsey Graham released a joint statement on Tuesday in which they pressed for Obama to move forward with such a plan. The Republican senators declared the cease-fire a failure and blamed “Russia and its Ukrainian proxies” for assaulting Debaltseve.

They demanded that in addition to arming the Kiev regime, the Obama administration impose tougher economic sanctions on Russia to “change Putin’s behavior.” McCain and Graham called for the removal of Russia from the SWIFT financial network, a move that would significantly curb the access of Russian banks to the international financial system.

EU Foreign Minister Federica Mogherini declared in a statement Wednesday that the actions of the separatists in Debaltseve constituted a “clear violation of the cease-fire” and called on Russia and the separatists to “immediately and fully implement” the terms of the Minsk agreement. She warned that the EU was prepared to take “appropriate action” in the event of further violations of the agreement.

At a meeting of the UN Security Council on Tuesday, US Ambassador to the UN Samantha Power accused Russia of supporting an “all-out assault” in Ukraine in violation of the cease-fire. She baldly repeated US allegations, unsubstantiated, that Russian troops were involved in the fighting in eastern Ukraine and Russian arms were being funneled to the separatists. She declared that Russia had “manufactured and continues to escalate the violence in Ukraine.”

The crisis in Ukraine began last year after a pro-Western government came to power in a coup backed by the US and EU and spearheaded by fascist forces. The putsch ousted the elected pro-Russian president, Viktor Yanukovych.

After opposition to the regime emerged in the Donbass region, which has a majority Russian-speaking population, Kiev began military operations in an attempt to violently suppress the separatists.

Large urban centers, including Luhansk and Donetsk, have been subjected to months of artillery shelling and mortar attacks by Ukrainian forces. Ukrainian military assaults have been spearheaded by fascist and nationalist “volunteer battalions,” including the notorious Azov Battalion, whose members are known to sport Nazi insignia on their helmets, and the Right Sector militia headed by Dymytro Yarosh, a devotee of Ukrainian nationalist and Nazi collaborator Stepan Bandera.

A cease-fire deal negotiated between Kiev and the pro-Russian rebels in September never took hold, with fighting continuing through the end of last year. Kiev launched a renewed offensive in January to solidify its control over territory in the east, but the action quickly backfired, with the separatists making significant territorial gains in a counter-offensive. The position of the Ukrainian military continued to deteriorate in the face of the separatist offensive in the east and opposition to conscription in the west.

Significant resistance has emerged in western Ukraine to the military draft that came into effect at the end of January, with many reportedly fleeing the country to avoid service. Morale is reportedly extremely low amongst the government’s armed forces, with thousands of reported desertions.

According to estimates by the UN, more than 5,400 soldiers and civilians have been killed in the conflict, while more than a million people have been displaced. A German intelligence estimate cited by the Frankfurter Allgemeine Zeitung places the death toll much higher, at approximately 50,000.