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Ukraine leader heads to China, leaving turmoil at home

Source: Reuters - Tue, 3 Dec 2013 12:54 PM
Author: Reuters
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* Thousands of protesters outside parliament building

* Protesters blockade government, some strike

* Parliament rejects motion for confidence vote

* President Yanukovich leaves on planned China trip

By Natalia Zinets and Pavel Polityuk

KIEV, Dec 3 (Reuters) - Embattled Ukrainian President Viktor Yanukovich flew to China on Tuesday with his government facing uproar in parliament and turmoil on the streets over a decision to spurn closer ties with the European Union under pressure from Russia.

International markets piled in, driving up the cost of insuring Ukraine's mounting debt against default and threatening a financial crisis that could force Yanukovich's hand.

Black-clad riot police faced off in freezing conditions against several thousand pro-EU protesters outside parliament in Kiev while opposition leaders inside the chamber shouted down Prime Minister Mykola Azarov during a fiery debate.

Azarov's allies voted down an opposition demand to hold a vote of no-confidence in the government, but the victory was unlikely to provide much relief.

Some 350,000 protesters massed on Sunday in Kiev in the biggest show of popular anger since Ukraine's 2004 'Orange Revolution'. Thousands are still manning barricades and picketing government buildings.

The government's Nov. 21 decision to reject a deal on closer trade ties and integration with the EU has plunged the country of 46 million into turmoil, laying bare once more a deep split in thinking between the Russian-speaking East and Ukrainian-speaking West.

Ukraine's currency, bonds and share prices have come under severe pressure. The central bank has been forced to assure people their savings are safe, while the finance minister said Ukraine was repaying its debts and would continue to do so.

"Ukraine is a reliable borrower and is flawlessly fulfilling, and will fulfil, all of its obligations on time," Yuri Kolobov said in a recorded message broadcast by state television on Tuesday.

The cost of insuring Ukraine's debt against default rose to near highs not seen since late 2009. The government must find more than $17 billion in 2014 to meet gas bills and debt repayments.

"I ask Yanukovich - resign!" Vitaly Klitschko, a former heavyweight boxing champion and now leader of the opposition Udar (Punch) party, told the parliament.

"Don't do anything stupid - don't drive yourself and the country into a dead end."

"COUP D'ETAT"

Azarov continues to command a majority, despite an announcement by the speaker of the parliament that two of 207 deputies in Yanukovich's Regions Party had left the party faction to become independents.

In parliament, 186 deputies voted to hold the confidence vote, short of a majority. Five voted against and the remaining 147 either abstained or did not vote at all, in what will be seen as a warning to Azarov of discontent in government ranks.

Azarov has said the crisis "has all the signs of a coup d'etat", but struck a more conciliatory tone on Tuesday.

He apologised for the use of force by police against protesters over the weekend and urged against a repeat of the Orange Revolution, when huge street protests forced the annulment of a fraudulent presidential election won by Yanukovich.

"We reach out our hand to you; push away the intriguers, the intriguers seeking power and who are trying to repeat the scenario of 2004," he said.

"In the name of the government, I want to apologise for the actions of law enforcement agencies on (Independence) square."

But speaking in Russian, Azarov strained to be heard over opposition chants demanding he address the chamber in Ukrainian. In what may trigger a showdown, the prime minister said his cabinet would hold its Wednesday session at the main government building, which protesters have blockaded since Monday.

The opposition itself is an unlikely alliance of political creeds, lacking the kind of unifying leadership of 2004.

Orange revolutionary and former prime minister Yulia Tymoshenko, Yanukovich's chief rival who lost a presidential election to him in 2010, is in jail over a gas deal with Russia. Kiev has rejected a request for her to travel to Germany for medical treatment.

In a throwback to 2004, tented camps and supplies of food and warm clothing suggested protesters were hunkering down for a long campaign to bring down Yanukovich. They blocked the entrances to the main government building for a second day, though Azarov's cabinet was still functioning.

Conceding that "turmoil is never good for business," Italian lender Unicredit nevertheless said it had no plans to walk away from its business in Ukraine having just finished merging its two banks in the country with assets of around 3.3 billion euros.

"I don't really think that what we are seeing in Ukraine is very much different from what we have seen in the last six or seven years," Gianni Franco Papa, Unicredit's head of central and eastern Europe, told reporters in Vienna.

Yanukovich is scheduled to stay in China until Dec. 6, seeking loans and investment to avert a debt crisis.

Russia wants to draw Ukraine into a Moscow-led customs union and prevent it moving closer to the EU, a decision that would signal a historic shift towards the West and away from Kiev's former Soviet masters in Moscow.

But the tug-of-war between Brussels and Moscow for influence in Ukraine has so far done little to alleviate its looming debt crisis and the China visit will involve the signing of at least 20 economic and trade agreements.

"Yanukovich is trying to show that the European Union and Russia are not the only possible partners for Ukraine," said Volodymyr Fesenko of Ukraine's Penta think-tank.

Beijing has already provided the former Soviet republic with loans worth $10 billion. However, said Fesenko, Beijing may now demand assurances over Ukraine's political and economic stability, adding: "Ukraine is unlikely to secure direct financial aid (from China)."

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