Dmitri Oreshkin, in his "Novoye Vremya" article, 'Putin, Kerry and the Black Hole of Donbas', suggests a frozen conflict scenario is probably the best option for the territory currently held by Russian backed separatist in Eastern Ukraine.
US Secretary of State Kerry, during his meeting with Putin, may have offered his host in Sochi a compromise: the United States will slightly weaken sanctions if Russia, if in return, hostilities cease and the sending weapons and armaments into Ukrainian territory stopped.
[The 'Slate's' Joshua Keating is of a similar opinion, claiming..."if Russia can be convinced that full-scale hostilities are not in its interest, there’s potential for the war to turn into a “frozen conflict”: the rebel-held eastern regions would remain under de facto Russian control for the time being but violence would die down. While far from an ideal outcome, this would at least give Kiev some time to rebuild Ukraine’s economy and military with substantial western support. The alternative is a return to full-scale hostility with deepening western military involvement."]
Putin is not prepared to put up the money to maintain Donetsk: rather he is is doing all he can to dump the costs to run the region onto Ukraine proper. DNR leader Pushilin has already said that insurgents are ready to be a part of Ukraine, but with greatest possible autonomy, i.e. to realise a "Transnistria-2" type project.
For Putin it is important extract himself from the situation without losing face, but in reality, over the last year and a half, he has actually 'lost' Ukraine. However he can claim a 'virtual victory' having annexed the Crimea and its two million population in what was a virtual, P.R. driven operation.
The same applies to the Donbas. The Kremlin cannot support the region in any significant way and current leaders in Donetsk and Luhansk are incapable of growing the economy because they do not understand how the economy works. All they know is aggression and plunder.
The economy of Donbas is seriously damaged and much infrastructure destroyed, but a great number of people who live there will never feel much sympathy for Kyiv again.
Their plight is well described by the "Insider' site in an article describing life in the self-styled Luhansk People's Republic [LNR] one year after their "independence referendum".
Violent clashes have taken place between 'official' LNR armed structures and numerous independent Cossack units caused by disagreements over payments and extortion rackets. These may have subsided somewhat as areas of influence become better defined.
The social and economic situation is very difficult. The price of products in shops is much greater that in the rest of Ukraine as a result of the blockade. For transport to get through bribes have to be paid to both Ukrainian and LNR border guards, and prices of Russian products are greater in any case. Burgeoning illegal schemes for transfer of cash from Ukraine to the LNR and for obtaining 'propusky' [passes] have sprung up. Many of the latter are inevitably forgeries, and bribe-taking has become order of the day.
A rudimentary banking system based on the Russian rouble has come into being quite recently. Pensions were paid out once in April, but have not been paid out since.
Sources of funding for the LNR budget are not clear - they may include some taxes, sales of coal to Russia, and the 'fire-sale' sell-off of industrial equipment to buyers in Russia. Huge contraband schemes which were operated even before the current troubles continue to operate, but have been taken over by LPR leaders.
Matters are particularly difficult in the fields of medicine and education. Many doctors have left, leaving few remaining to treat patients. Those that have stayed find themselves in an almost impossible situation. One can only assume that any medical treatment has to be paid for strictly' under the table'.
The last time LNR doctors and teachers received any money was in November 2014. Since they have only been given food rations from time to time.
Since the battle for Debaltseve there has been an attempt to form a battle-ready 'Novorossiya' army comprising several military brigades and also a 'Republican Guard'. In total, Novorossiya armed forces may comprise 35-45 thousand men. The rapid increase in size is primarily due to the now stable financing of these units, particularly at a time of severe mass unemployment amongst the remaining populous.
Russian advisers and specialists are actively involved in this process, and are forming anti-aircraft units supplied with Russian surface to air missiles.
Several closed off zones have sprung up where even local fighters do not have access. It is likely that various Russian electronic surveillance systems are deployed there intercepting and suppressing Ukrainian communications. These systems are capable of communicating with Russian military headquarters and their state of the art air defence systems.