(This Sept 29 story has been refiled to correct date)
By Tom Balmforth and Jonathan Landay
KYIV (Reuters) - Ukrainian troops are moving to capture the Russian-held eastern town of Lyman, threatening a new setback for Kremlin leader Vladimir Putin's campaign in the Donbas as he prepares to declare the region part of Russia.
The capture of the town in the north of Donetsk region could pave the way for Ukraine to make inroads into the adjacent Luhansk province, foiling Putin's goal of seizing all of the industrial Donbas region declared after his forces failed to subdue the entire country in February, military analysts said.
The regions are among four chunks of eastern and southern Ukrainian territory that Putin is expected on Friday to declare Russian-annexed land after what Kyiv and Western countries say were bogus referendums staged at gunpoint.
Putin has said Moscow could use nuclear weapons to defend Russian territory if necessary. Kyiv has said it won't be swayed by such threats and will press ahead with its plans to drive all Russian forces out of Ukraine.
Lyman has served for months as a logistics and transport hub anchoring Russian operations in Donetsk region's north and its capture would be Kyiv's biggest gain since a lightning counter-offensive retook swathes of Kharkiv region this month.
The window is narrowing for Ukraine to make major advances before winter sets in, slowing down operations and giving Russia, which has declared a partial mobilisation, more time to fortify its lines.
Konrad Muzyka, director of the Rochan military consultancy in Poland, said Russian forces were trying to hold on in Lyman to buy time to prepare defensive lines and that the town would fall to Kyiv.
"The Russians are trying to delay the Ukrainian actions as much as possible so that they can create or upgrade their line of defence between Sievierodonetsk and the border with Russia," he said.
HUB FOR RUSSIAN FORCES
President Volodymyr Zelenskiy told Ukrainians in his nightly speech on Tuesday that there was "good news" from the front, though he did not elaborate.
Luhansk region's exiled governor said this week: "When the situation around Lyman is resolved, then we can closely watch the actions of the Ukrainian army because Lyman is close to the river and on the other bank begins Luhansk region."
"The weather doesn't really play into our hands, but in general, I still think we'll get the result soon," he said.
On Thursday, a Russian proxy official in Donetsk region said it was "pretty tense" and "difficult" in Lyman and that Kyiv's forces were constantly trying to attack.
"Of course we understand that such attempts will continue, at the moment our units are able to repel all these attacks," the official was quoted as saying by Russia's Tass news agency.
Lyman has seen its role as a hub for Russian forces diminish since Moscow's troops were routed in northeast Kharkiv region, analysts said. The town had a population of 20,000 before Russia invaded on Feb. 24.
"Ukrainian forces have made substantial gains around Lyman in the past 24 to 48 hours, with both Russian and Ukrainian sources indicating that Ukrainians have advanced west, north and even northeast of Lyman," said Karolina Hird, a researcher at the Institute for the Study of War.
"The envelopment of these positions and the collapse of this pocket around Lyman may allow - depending on how Ukrainian forces decide to pursue further gains - to unhinge this line and open up potential further advances to the east," she said.
John Herbst, a former U.S. ambassador to Ukraine, said the fall of Lyman "would seriously complicate the Russian position in northeastern Ukraine at an absolutely minimum".
"It would probably imperil their ability" to hold Luhansk, he said.
Luhansk, Herbst said, "may be the only pre-February 2022 territory that Ukraine has a good chance of taking in the short term, say the next four to six weeks."
'FANTASY VS REALITY'
Russia, which captured chunks of southern and eastern Ukraine in its invasion this year, annexed the Ukrainian peninsula of Crimea in 2014 and backed separatist proxies who carved out two self-styled "people's republics" in the east.
Muzyka said it was still not yet clear how Russia's mobilisation of hundreds of thousands of reservists to plug big gaps in manpower would play out.
"If Russia starts deploying this personnel en masse, then it is going to have at least a short-term effect on the battlefield. It may decrease the tempo of Ukrainian attacks," he said.
Seth Jones of the Center for Security and International Studies think tank in Washington said the fall of Lyman would highlight "the disconnect in the Kremlin between fantasy and reality."
"Putin is attempting to solidify control of areas he is actually losing through the sham referendums. The fall of Lyman would also deal yet another blow to Putin's objective of seizing all of the Donbas."