The decree, which was published on the Kremlin's website, states that some residents in the parts of Ukraine's Donetsk and Luhansk regions that are under separatist control will have their applications considered in less than three months. Those granted Russian citizenship would have to swear allegiance to Russia.
Putin's decision could trigger a major escalation of the war that started in eastern Ukraine in 2014 and shatter hopes for peace in the area - also known as Donbass - that were renewed with the election of a new Ukrainian president, Volodymyr Zelenskiy.
Zelenskiy's office said in a statement that the move confirms Russia's role as an "aggressor state" in the conflict in the east and added that it "does not bring us closer to the main goal of stopping the war."
Outgoing President Petro Poroshenko called Putin's decree "yet another unprecedented act of Russian interference in Ukrainian affairs" and accused Moscow of undermining the peace process. Foreign Minister Pavlo Klimkin earlier on Wednesday called on Ukrainians in the separatist-controlled territories to "refuse Russian passports."
Only holders of ID cards issued by separatist authorities will be eligible for the expedite procedure offered by Putin. Separatist authorities said Wednesday that they had issued about 300,000 such ID cards in the area with an estimated population of 3.7 million.
Commenting on the citizenship decree at a meeting with lawmakers in St. Petersburg, Putin said his order was not intended to "create problems for the new Ukrainian administration." He said he signed the decree for "humanitarian" reasons, claiming people in Donetsk and Luhansk are suffering and "have no civil rights left."
Putin did not explain why he did not offer expedited citizenship for Donbass residents earlier despite insistent calls from Russian nationalists. The Kremlin did not act on the calls, even during the worst fighting in a conflict that has claimed more than 15,000 lives.
Oleksandr Turchynov, secretary of the Ukrainian National Security and Defense Council, said on Wednesday that "Putin is laying the legal groundwork" for an overt offensive in the east, where clandestine Russian troops led rebel offensives in 2014 to 2015. Turchynov referred to a Russian law which allows a use of force to protect Russian nationals abroad.
Speculation over whether the Kremlin would fast-track citizenship for Ukrainians in separatist-controlled areas swirled in Russia throughout the Ukrainian presidential campaign. However, the assumption was the Russian government would take such a step only if Poroshenko was re-elected.
Poroshenko lost Sunday's runoff election by huge margins to comedian-actor Zelenskiy, who is set to be sworn in next month. Zelenskiy has said his priority as president is ending the war in the east.
During the campaign, Zelenskiy did not sound as bellicose as his predecessor and said he wanted a peaceful resolution of the conflict. Putin, unlike other world leaders, has not yet congratulated the president-elect on his election victory, saying the election results were not yet final.
Volodymyr Yelchenko, Ukraine's envoy at the United Nations, said he has reached out to the U.N. Security Council to discuss the move, which he said grossly violates a 2015 peace accord.
After annexing Crimea in a hastily called 2014 referendum, Russia threw its weight behind separatist rebels in eastern Ukraine but stopped short of recognizing their independence vote. Ukraine and almost all the world views Russia's annexation of Crimea as illegal.
Yuras Karmanau contributed to this report from Kiev, Ukraine.
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