(For more on the Ukrainian crisis, see EXT2.)

May 17 (Bloomberg) -- Ukrainians in Donetsk announced the formation of a government for their self-declared breakaway state, as NATO’s chief warned of further Russian intervention in the run-up to May 25 elections.

Alexander Boroday will be prime minister of the “Donetsk People’s Republic,” Dmitry Gau, a spokesman for the separatist group, said by phone late yesterday. Donetsk and Luhansk held unofficial referendums on secession last weekend, announcing large majorities in favor.

The government in Kiev and its allies in the U.S. and EU said the vote was illegal, and accused Russian President Vladimir Putin of stirring up unrest in eastern Ukraine after annexing Crimea. Russian Foreign Minister Sergei Lavrov said this week that Russia won’t send troops into eastern Ukraine and isn’t trying to foment separatist sentiments there.

“Guarantees given by Russia about sovereignty and integrity” can’t be trusted, Anders Fogh Rasmussen, secretary general of the North Atlantic Treaty Organization, told reporters in Bucharest yesterday. “We want Russia to respect its international obligations and stop trying to destabilize the situation.”

NATO says Putin, who seized the Black Sea peninsula of Crimea in March, still has 40,000 troops on Ukraine’s border and hasn’t fulfilled a promise last week to pull them back. The U.S. and the U.K. have vowed to tighten sanctions on Russia if the presidential election is undermined.

Stocks Rally

Russia’s benchmark Micex Index of stocks added 0.8 percent yesterday, posting its third straight weekly gain, though it’s still down more than 6 percent since Putin’s Ukrainian ally Viktor Yanukovych was toppled by a popular uprising in February. Ukraine’s hryvnia fell 1.1 percent against the dollar yesterday, extending its loss this year to 31 percent.

Ukraine’s army is fighting to restore control in eastern provinces where separatists seized many government buildings. The Interior Ministry said yesterday that Aleksey Relke, commander of a separatist military group in Luhansk, had been detained.

Ukraine says the military operation will stop once separatist groups surrender their weapons and release hostages. The pro-Russian rebels have been excluded from national unity talks that began this week.

Russia has objected to the plan to hold Ukrainian elections amid the current unrest, though it has softened its opposition in recent weeks. Lavrov signaled that Russia views Petro Poroshenko, the billionaire frontrunner in the vote, as someone it can do business with.

--With assistance from Volodymyr Verbyany and Daryna Krasnolutska in Kiev, Aliaksandr Kudrytski in Minsk, Belarus, Scott Rose in Moscow and Andra Timu in Bucharest.

To contact the reporters on this story: Kateryna Choursina in Kiev at [email protected]; Daria Marchak in Kiev at [email protected] To contact the editors responsible for this story: Balazs Penz at [email protected]; James M. Gomez at [email protected] Ben Holland, Larry Liebert