Ukraine President Fails to Quell Unrest After Azarov Exit

Photographer: Rob Stothard/Getty Images

Anti-government protestors gather in Independence Square in Kiev on Jan. 29, 2014. Close

Anti-government protestors gather in Independence Square in Kiev on Jan. 29, 2014.

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Photographer: Rob Stothard/Getty Images

Anti-government protestors gather in Independence Square in Kiev on Jan. 29, 2014.

Ukrainian President Viktor Yanukovych failed to quell nationwide street protests calling for his resignation after days of concessions culminated in the departure of his loyalist prime minister.

Premier Mykola Azarov, 66, said yesterday that he stepped down “for the sake of the peaceful resolution of the conflict.” Opposition leaders maintained a demand for a snap presidential election, while demonstrators held out at Kiev’s protest camp, filling sand bags with ice in minus 11 degrees Celsius (12 degrees Fahrenheit) weather to reinforce barricades.

“The resignation of the prime minister is a concession that’s too little, too late,” Lilit Gevorgyan, senior economist at IHS Global Insight, said yesterday by e-mail from London. “The protesters aren’t likely to go away. The authorities would like to muddle through the entire year but it is highly questionable if this tactics can work.”

Yanukovych, 63, is struggling to contain unrest that’s spread from the capital to other cities across the nation of 45 million people, a key transit route for Russian energy supplies to Europe. The two-month crisis, sparked by the president’s rejection of a European integration pact, turned deadly last week as the passage of anti-protest laws triggered riots.

The yield on dollar-denominated government debt due 2023 was up 2 basis points to 9.05 percent at 10:46 a.m. today, data compiled by Bloomberg show. That follows yesterday’s drop of 60 basis points, the biggest decline on a closing basis since Dec. 17, when Ukraine agreed on a $15 billion bailout from Russia. The hryvnia weakened to 8.4950 per dollar, the lowest level since September 2009.

‘Logical Step’

Azarov said his deputy, Serhiy Arbuzov, would act as premier, while the cabinet will stay on until Yanukovych names a replacement. Opposition leader Arseniy Yatsenyuk, 39, has rejected an offer to take the post twice in the last five days. Ex-world heavyweight boxing champion Vitali Klitschko, who heads the opposition UDAR party, said he wouldn’t consider working in a government while Yanukovych was in power.

The president’s resignation would now be a “logical step,” he said yesterday in a statement. The protesters “will go home only after the authorities meet society’s demands.”

The opposition also wants to revise the constitution, possibly reverting to the 2004 version under which parliament picks the prime minister. At present, that decision is up to Yanukovych, who has 60 days to install a new government.

Protests Persist

Activists at Independence Square and nearby Hrushevskogo street, the epicenter of last week’s riots, want more than the prime minister’s exit.

“I’m not satisfied just with Azarov stepping down,” said 29-year-old Vasyl, a festival organizer who recently arrived in Kiev and declined to give his last name for fear of reprisal. “If we look at what happened -- people were killed, arrested, kidnapped and tortured -- it’s not enough. He and Yanukovych should bear responsibility and should be tried.”

To placate demonstrators, lawmakers voted 361-2 yesterday to repeal anti-rally laws that allowed the authorities to keep closer tabs on mobile-phone use and criminalized erecting tents in public places and occupying government buildings. They delayed a vote on an amnesty for detained activists to today.

Justice Minister Olena Lukash said Jan. 27 that the amnesty bill would only take effect if demonstrators cleared the streets and returned all state buildings they had seized.

Regional Unrest

The unrest has spread beyond the capital, where activists have taken over the agriculture and energy ministries. Protesters are occupying or blocking the offices of governors picked by Yanukovych in more than half of the nation’s 25 regions, while police have expelled demonstrators from others.

The opposition says six protesters have died and a thousand have been injured. Police have begun an investigation after three people died from gunshot wounds, while 116 people have been detained on suspicion of participation in riots.

A policeman wounded on Jan. 27 in Kherson, south Ukraine, died yesterday, the Interior Ministry said. More than 300 officers have sought medical help, according to the ministry.

Azarov had warned frequently of the crisis’s economic dangers for Ukraine, which is mired in its third recession since 2008. The economy shrank 0.3 percent in the third quarter from the previous three months, while foreign reserves have fallen to $20.4 billion from $24.5 billion a year ago.

‘IV Drip’

Standard & Poor’s (XOP) lowered its junk credit rating on Ukraine by one grade yesterday, assigning it a negative outlook, which suggests it may be cut further. The move, which S&P said was triggered by “political instability,” leaves Ukraine’s CCC+ rating as the lowest among rated countries along with Argentina. It’s seven steps short of investment grade.

Russian President Vladimir Putin ordered his government at a meeting outside Moscow to abide by terms of the $15 billion bailout and gas discount it granted Ukraine last month in exchange for its rejection of closer ties with the EU.

His prime minister, Dmitry Medvedev, said Ukraine wasn’t paying its gas bills even with the lower price, which “seriously changes the situation.” That, plus previous gas debt, would be a topic of new talks immediately after a new government is formed in Kiev.

Polish Prime Minister Donald Tusk said he was working to persuade EU leaders to offer an improved aid package and said the long-term benefits of cooperating with the bloc were better than Russia’s “IV drip” that doesn’t fix Ukraine’s problems.

EU ‘Force’

Ukraine’s “brave” protesters are showing “that they are not ready to turn their backs on Europe,” German Chancellor Angela Merkel said to applause in the lower house of parliament in Berlin. Ukrainians shouldn’t face an “either-or” choice of allegiance between Russia and Europe and the door remains open for it to sign the association pact with the bloc, she said.

“The German government will make that point to Russia with undiminished force, for the benefit of the entire region,” she said.

Leaders from the 28-member EU are still trying to broker a conclusive peace deal in Kiev, with foreign-policy chief Catherine Ashton visiting Kiev today.

Jailed ex-Premier Yulia Tymoshenko said the protesters’ fight isn’t over, issuing a rallying call from prison.

“You started your fight to reboot the authorities and win Ukraine back for yourselves,” she said yesterday in an e-mailed statement. “So do it! Don’t stop until you get what you want!”

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 editor responsible for this story: James M. Gomez at jagomez@bloomberg.net

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