KIEV (Reuters) - Ukraine's SCM Group, a financial and industrial group whose businesses are the main employer in the eastern conflict zone, said on Thursday it would fight a demand by separatists to re-register firms in rebel-held areas.

Separatists have demanded Ukrainian companies in their territory register locally and pay them taxes in response to a rail blockade on goods from rebel territory that has highlighted the deep economic ties between the regions, despite three years of simmering military conflict.

"We consider private property to be sovereign and the demand to re-register our businesses and pay taxes to the self-proclaimed 'Donetsk and Luhansk People's Republics' is unacceptable," SCM Group said in a statement.

"No kind of pressure will force us to change the jurisdiction of our assets."


SCM Group is owned by Ukraine's richest businessman, Rinat Akhmetov, and on Wednesday one of its telecoms firms and a humanitarian organization funded by Akhmetov said their businesses based in separatist-controlled Donetsk city had been seized by armed men.

Ukrainian President Petro Poroshenko condemned the separatists' move as illegal appropriation and said a recent flare-up in fighting showed that the crisis in the east was once again escalating.

Previously, SCM Group's Metinvest [METIV.UL], Ukraine's largest steelmaker, said if separatists took control of mills or mines in rebel-held areas it would be forced to halt production in the affected operations.

In its statement, the conglomerate emphasized its importance as one of Ukraine's top employers. "We provide jobs for hundreds of thousands of people across the country, from east to west, including in territory temporarily not under Ukraine's control."

The rail blockade, initiated by some lawmakers and military veterans but opposed by the government, has already forced Metinvest to halt production temporarily at one of its mills and several coal mines.

Both the Ukrainian authorities and separatist officials have warned of damage to the economy from the squeeze on rail trade from rebel-held territory, which was initiated by a group of Ukrainian lawmakers and military veterans.

Separatists say local industrial firms are suffering, while Ukraine says the country could be hit by rolling blackouts and lost foreign export income of up to $2 billion.

(Reporting by Natalia Zinets; Writing by Alessandra Prentice; Editing by Richard Lough)

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