Ukrainians Blockade Government Buildings After Clashes

Photographer: Yuriy Dyachyshyn/AFP/Getty Images

Protesters shout slogans as thousands gather for a pro-EU opposition rally in the center of western Ukrainian city of Lviv on Dec. 1, 2013. Close

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Photographer: Yuriy Dyachyshyn/AFP/Getty Images

Protesters shout slogans as thousands gather for a pro-EU opposition rally in the center of western Ukrainian city of Lviv on Dec. 1, 2013.

Opponents of Ukrainian President Viktor Yanukovych blocked state buildings and thousands of demonstrators crowded streets in subzero temperatures to protest his refusal to sign a European Union trade accord.

Opposition leaders called for a no-confidence vote tomorrow against the government of Prime Minister Mykola Azarov, who warned that protests are spinning out of control, according to Interfax newswire. Clashes in the capital last night left hundreds injured during a police crackdown on the 10th day of unrest, while European Commission President Jose Manual Barroso urged authorities to respect democratic freedoms.

“We need a full reset of power,” boxing world champion Vitali Klitschko, who’s also the head of the opposition Udar party, said in Kiev today. “People are on the streets, they’re tired, but it’s getting worse. We have to change the system.”

In an echo of the Orange Revolution in 2004, emotions are flaring in the debate whether Ukraine should tie its future to Russia or the EU. The two powers are jostling for influence over the ex-Soviet nation of 45 million, an essential transit route for Russia’s gas shipments to Europe. Yanukovych’s opponents want early parliamentary and presidential elections, said Arseniy Yatsenyuk, the head of jailed ex-Premier Yulia Tymoshenko’s party.

Russian Response

The protests gripping the country from Lviv to Kharkiv are the biggest political crisis since the events nine years ago, when a group including Tymoshenko overturned a presidential election initially won by Yanukovych.

Russian President Vladimir Putin, who backed Yanukovych’s failed presidential candidacy during the Orange Revolution, said today events in Ukraine are akin to “pogroms, not revolution.” He also predicted the demonstrations, which he said were being prepared for 2015 presidential elections, will wane.

While the 2004 uprising was peaceful, with hundreds of thousands camping out in freezing winter cold for weeks, protests now are marred with violence. That changes the dynamics, according to Gleb Pavlovsky, president of the Effective Policy Foundation in Moscow.

“Everything changed when the Berkut police unit beat protesters,” Pavlovsky said by phone from Moscow today. “For Ukraine, this is an absolutely new phenomenon. It’s a shock.”

Nationwide Strike

The opposition yesterday announced plans for an “all-Ukrainian” strike, urging people to come to Kiev and take part in the protests. Outdoor markets in Kiev are joining the work stoppage, Tymoshenko’s party said on its website.

“Political developments in Ukraine took on an unexpected character and escalated into an apparent political crisis,” Alexander Morozov, Moscow-based chief economist for Russia, the Commonwealth of Independent States and Baltic countries at HSBC Holdings Plc (HSBA), said in an e-mailed note today. “The president and the government risk losing control over the situation and we expect important political changes to follow shortly.”

The yield on Ukraine’s 2023 government bonds rose 0.6 percentage point to 10.58 percent, the highest since they began trading on April 17, as of 5:30 p.m. in Kiev. The cost to insure the country’s debt against non-payment using credit-default swaps rose to 1,067 basis points from 986.72 basis points on Nov. 28, leaving the Black Sea state the world’s third-riskiest nation behind Argentina and Venezuela.

Market Stability

The Ukrainian central bank hasn’t imposed any restrictions on the national currency, the hryvnia, said central bank Governor Ihor Sorkin.

Sorkin said the bank will ensure stability on the market and will intervene if needed.

Though the reaction in financial markets has been tamer than expected, the nation’s recovery from recession may be be hampered should the crisis continue, London-based Capital Economics said today in a report.

“There’s a lot of uncertainty about how events will pan out from here on, but the key point is that a prolonged period of political instability is the last thing Ukraine’s struggling economy needs,” Liza Ermolenko, an emerging-markets economist at Capital Economics wrote. “Protests in Ukraine only add to reasons to be worried about a further deterioration in the economy and the external position.”

Demonstrators who camped out all night blocking the streets arrived at the cabinet’s building before 6:30 a.m. in Kiev, chanting “Good morning,” according to a broadcast on Channel 5 television.

Blocked Entrances

Protesters also blocked the central bank’s entrance. The mayor’s office was seized yesterday and a group stormed the headquarters of the presidential administration. Across the capital city today, groups of protesters sang the national anthem every hour as light snow dusted streets and squares.

At Independence Square, the center of the Orange Revolution, dozens of Ukrainian and EU flags snapped in the breeze, while hundreds of demonstrators attached flags to their clothing and handbags.

With no sign of the protests abating, the Kiev administration issued a storm alert tonight for more wind, snow and rain.

Protests began on Nov. 21 when Yanukovych suspended progress toward an association agreement with the EU, opting instead to strengthen ties with Russia, which supplies 60 percent of Ukraine’s gas. The protests grew over the weekend after the president failed to reconsider the deal at a Nov. 28-29 EU summit in Vilnius and the first clashes broke out.

Three-Way Talks

Putin said last month he doesn’t oppose the EU deal and suggested three-way negotiations. Barroso reiterated that the idea of such talks is unacceptable. The two sides accused each other of pressuring the Ukrainian government.

Putin’s government may have offered Ukraine $15 billion in loans, debt restructuring and asset purchases to persuade it not to proceed with the EU deal, the Ukrainian magazine Zerkalo Nedeli said. Azarov also said yesterday on Inter television he wanted to agree a new price of gas in two weeks.

Russia will offer cheaper natural gas to Ukraine if the government in Kiev opts to join the Moscow-led economic bloc, First Deputy Prime Minister Igor Shuvalov said in an interview.

Gas Agreement

“A gas agreement could help relieve Ukraine of a huge problem,” Shuvalov said in comments cleared for publication Nov. 30. “We can also give them a loan, but we will not help them without commitments on their part.”

Western leaders stepped up calls for calm as the confrontation intensified last night. NATO Secretary General Anders Fogh Rasmussen urged protesters and police to remain peaceful, according to a statement on the military alliance’s website. U.S. and EU ambassadors to Ukraine did the same.

Yanukovych said yesterday he still favors “moving toward the EU,” as long as that doesn’t hurt the country economically.

“Our country should integrate with the European nations as an equal partner,” Yanukovych said in yesterday’s speech to mark the 22nd anniversary of a referendum that clinched Ukraine’s independence after the Soviet Union collapsed in 1991. “I will not allow any serious economic losses and decline of living standards.”

To contact the reporters on this story: Daryna Krasnolutska in Kiev at dkrasnolutsk@bloomberg.net; Kateryna Choursina in Kiev at kchoursina@bloomberg.net

To contact the editors responsible for this story: Balazs Penz at bpenz@bloomberg.net; James M. Gomez at jagomez@bloomberg.net

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