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Kiev protesters gather, EU and Putin joust

Source: Reuters - Thu, 12 Dec 2013 03:27 PM
Author: Reuters
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* EU wants Ukraine to stick to westward course, not go to Russia

* Yanukovich pollicy U-turn has brought thousands on to Kiev streets

By Richard Balmforth

KIEV, Dec 12 (Reuters) - Thousands of anti-government protesters gathered in central Kiev, rebuilding barricades torn down by police, as a delegation headed for Brussels to seek crucial European Union and International Monetary Fund aid.

Russian President Vladimir Putin, concerned protests could yet induce Ukrainian leader Viktor Yanukovich to seal a trade agreement with the EU to Moscow's detriment, painted a picture of a secure future for Ukraine in a Russian-led alliance.

"Our integration project is based on equal rights and real economic interests," said Putin, referring to a customs union with Belarus and Kazakhstan which he plans to develop into a political and trading bloc to be known as the Eurasian Union.

"I'm sure achieving Eurasian integration will only increase interest (in it) from our other neighbours, including from our Ukrainian partners ... I hope that all political sides can successfully reach an agreement in the interests of the Ukrainian people," he said in a state-of-the-nation address.

European officials are in discussion with the IMF, the World Bank and other major financial bodies on ways of helping the ex-Soviet republic should it decide to sign the free-trade agreement with the EU after all.

Putin had threatened to respond to such a deal with economic sanctions against Ukraine, which has huge debts and unpaid gas bills outstanding with Moscow. Ukraine's ultimate decision could be decisive to Putin's Eurasian Union plan.

A sudden decision by President Yanukovich on Nov. 21 to walk away from a trade-and-political agreement with the EU and revive trade with Ukraine's old Soviet master has brought hundreds of thousands on to the streets in a chain of weekend rallies, each one larger than the one before it.

Battalions of riot police withdrew on Wednesday from a protest camp in central Kiev after moving against demonstrators in the early hours in an angry confrontation.

But more people were streaming into the snowbound capital for the weekend to boost the 10,000 or so crammed onto Independence Square, focal point of the unrest. About 70,000 extra people from three areas of western Ukraine alone were heading for the capital, citizens' protest groups said.

Demonstrators have re-built barricades, torn down by police, using public benches, metal barriers and wire-netting to fence off the square, known simply as the 'Maidan' in the revolutionary lexicon.

The protests began as pro-Europe demonstrations but have now morphed into a broader show of street anger against perceived corruption and sleaze in the country Yanukovich has led for nearly four years.

At stake is the future of a country of 46 million people, torn between popular hope of joining the European mainstream and the demands of Russia, which controls the flow of cheap natural gas needed to stave off bankruptcy.

A flurry of high-level diplomacy has added to geo-political overtones as Ukraine has found itself again at the centre of an East-West tug-of-war.

After talks earlier this week with high-level U.S. and EU missions, Yanukovich was weighing their calls to resume talks with Europe and the IMF, as an alternative to sealing the deal with Russia and moving closer to a Moscow-led customs union.

After Yanukovich met Putin on Dec. 6, Ukrainian Prime Minister Mykola Azarov said the two sides had agreed a strategic partnership.

Some believe that Yanukovich may sign a series of agreements - almost certainly bringing cheaper gas for Ukraine and possibly credits - in Moscow on Dec. 17.

Heading the Ukrainian team to Brussels on Thursday was first deputy prime minister Serhiy Arbuzov, and the ministers of finance, economy and revenue and duties, and the head of the central bank.

FINANCIAL HARDSHIP

The crisis has added to the financial hardship of a country on the brink of bankruptcy. The cost of insuring Ukraine's debt against default has hit four-year highs.

It now costs more than $1 million a year for five years to insure $10 million in Ukrainian debt over that term, reflecting high default risk.

Azarov was quoted as saying on Wednesday he had asked the EU for 20 billion euros ($27 billion) in aid to offset the cost of signing the EU deal, which Kiev backed away from on Nov. 29.

It is not clear how Azarov came to the 20 billion figure. But EU officials believe it was based on Kiev's broad estimates of the cost of lost trade with Russia and the financial burden of meeting EU regulations that come as part of any deal.

The most Brussels has so far offered is 610 million euros in macro-economic assistance.

But EU officials say the combined effect of aid and financing programmes from multiple institutions, including the EU, might go some way to providing Kiev with the investment it needs to remain solvent if it did finally opt to sign up with the EU.

It was still unclear whether Wednesday's U.S. and EU overtures, which came after clashes between police and protesters in the early hours, had had any influence on Yanukovich.

The U.S. State Department said it was considering all options, including sanctions, towards Ukraine if authorities used force against the peaceful protest.

On Wednesday night, Yanukovich invited all parties, including the opposition, for talks to find a compromise. But opposition leaders are insisting he fulfil the conditions they have laid down, which includes the dismissal of the government, early elections and the freeing of political prisoners.

World heavyweight boxing champion turned opposition politician Vitaly Klitschko repeated the opposition's demands on Thursday, saying: "Only after this can we be talking about a round table. But it (the round table) should take place with the participation of European representatives and members of civil society."

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