Ukraine and pro-Kremlin insurgents appeared to be observing a truce today that could stem five months of bloodshed but still failed to head off fresh Western sanctions against Russia and is unlikely to quell the separatist drive in the east.

The 12-point pact signed yesterday in the Belarussian capital Minsk is the first to be backed by both the Kremlin and Kiev since bands of Russian-speaking militias seized a string of government buildings across Ukraine’s industrial heartland in early April.

But highly sceptical Western leaders nonetheless decided to punish Russian President Vladimir Putin for his efforts in supporting the rebels by beefing up sanctions on Russia’s most crucial state firms.

“The only reason that we’re seeing this ceasefire at this moment is because of both the sanctions that have already been applied and the threat of further sanctions,” US President Barack Obama claimed.

But with the rebels winning notable gains in recent days and Russia outwardly defiant over the impact of earlier sanctions there was little sign the ceasefire would put an end to the eastern insurgency.

The closely coordinated steps by Washington and the European Union target Russia’s cash-generating energy and defence sectors, while taking aim at the overall economy by limiting Moscow’s ability to raise funds in the West.

Obama said these measures were needed to ensure Russian “follow-through” on the peace plan although the West remains painfully aware that its previous attempts to pressure Putin have met with little success.

EU diplomat said their “agreement in principle on new sanctions” would be officially implemented in writing on Monday.

And NATO approved a “spearhead” force of several thousand soldiers at its Wales summit that would maintain a “continuous” presence in eastern Europe nations that view Putin’s intentions with dread.

“This decision sends a clear message — NATO protects all allies at all times,” the alliance’s outgoing chief Anders Fogh Rasmussen said.

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