By Timothy Heritage
MOSCOW (Reuters) - Boxed into a corner by a financial crisis and the West's refusal to drop sanctions over the conflict in Ukraine, Russian President Vladimir Putin has come out fighting.
After a relative lull in the conflict in east Ukraine since a ceasefire deal was reached last September, separatists have launched a new offensive. Kiev says the rebels are supported by 9,000 Russian soldiers.
Moscow has denied sending in troops and weapons, blamed the renewed violence on Kiev and regretted the deaths of civilians, but done nothing to distance itself from the rebel cause.
Whether or not the separatists are acting on Moscow's orders, battlefield setbacks for Ukrainian government forces may be seen by Putin as offering hope of negotiating from a position of strength over the conflict.
The former KGB officer may think he has no choice - showing any sign of weakness could be politically disastrous for him in Russia.
"Putin has nowhere to retreat to. For Putin, a retreat or a step back would mean a drop in his ratings and a rise in public discontent," said Olesya Yakhno, an independent political commentator in Kiev.
"The main thing for Putin is that discontent does not grow among his supporters. His supporters demand new territorial gains and any step back would be seen by them as a defeat."
Far from being cowed by Russia's economic crisis, aggravated by the sanctions and a fall in the oil price, Putin has been as defiant as ever against the West as it became clear it had no plans to ease the economic pressure.
Allies say such a stance will help Putin remain popular despite predictions that public discontent will grow as prices rise during the financial crisis.
"When a Russian feels foreign pressure, he will never give up his leader," First Deputy Prime Minister Igor Shuvalov told the World Economic Forum in the Swiss resort of Davos last week, promising Russians would "eat less food, use less electricity".
Officials sent similar signals of defiance by dismissing a decision by S&P ratings agency to cut Russia's sovereign debt rating to "junk" status, with Putin's spokesman describing such moves as "politically motivated".
Putin has other aims in Ukraine, though it is not clear how far he will go to achieve his goal of ensuring Russia can maintain influence in the former Soviet republic or block Kiev's efforts to join the European mainstream.
Putin insists Ukraine must not join NATO. Another key demand is that the two eastern regions that have rebelled against the rule of Kiev's pro-Western leaders - Donetsk and Luhansk - must have broad autonomy, though he is widely seen as settling for their independence rather than demanding they join Russia.
Although Russia denies being a party to the conflict, rebel gains could weaken Kiev's leaders and force them to compromise.
"The main reason for the increase in military activities in Ukraine is Putin's wish to force the West and Ukraine to the negotiating table with Russia and the fighters," said Taras Berezovets, owner of Berta Communications, a strategic consulting company in Ukraine.
Many Ukrainians see a pattern being repeated. After weeks of setbacks, the separatists appeared to be on the verge of defeat last August but unexpectedly turned the tide of the conflict - thanks to what Kiev said was an influx of Russian troops.
Moscow denied sending in soldiers and equipment but Kiev was forced into compromises to prevent further losses, and agreed the ceasefire deal the next month which reduced but did not end the fighting that has now killed more than 5,000 people.
This time, Berezovets said, Putin might try to push for Crimea's legal separation from Russia following its annexation last March, and may look for a way to secure a deal that leads to the lifting of Western sanctions.
The new hostilities are seen by some observers as part of a plan by Putin to create a "frozen" - or unresolved - conflict that festers for years, making Ukraine harder to govern and slowing or blocking its integration into Europe's mainstream.
The renewal of fighting could also serve a purpose for Putin in deepening Ukraine's own economic problems, forcing Kiev to increase military spending and pushing it closer to bankruptcy, perhaps encouraging it to compromise.
A bolder goal, which analysts do not rule out, would be to help the rebels capture more territory and create a land corridor between Crimea and the self-proclaimed Donetsk and Luhansk people's republics (DNR and LNR).
Although the rebels deny responsibility for a rocket attack which Kiev said killed 30 civilians on Saturday in Mariupol, the port city on the Sea of Azov is in a strategically important location as a gateway to the south.
Mark Galeotti, a specialist on Russia at New York University, wrote on Twitter that if Mariupol fell to the rebels it would be "a real game changer", denting Kiev's credibility and making the DNR more viable as a "pseudostate".
(Additional reporting by Pavel Polityuk in Kiev, Editing by Janet McBride)