Ukraine at Impasse on Amnesty After Russia Warns on Aid

Ukraine’s president went on sick leave after protesters seeking his ouster rejected an amnesty offer and Russia threatened to withhold aid until the crisis-torn country forms a new government.

President Viktor Yanukovych angered the opposition by pushing through a law requiring activists to surrender seized buildings before scores of their detained comrades can go free. That followed a warning from Russian President Vladimir Putin that his administration may give Ukraine more aid only after it replaces the cabinet of former Prime Minister Mykola Azarov.

Yanukovych, 63, is facing calls to step down in protests that have spread from the capital to other cities since his rejection of a European Union association pact in November. The demonstrations turned deadly last week and the turmoil has prompted a tug-of-war between Russia and Europe for influence in the nation of 45 million people. The opposition vowed to brave freezing temperatures to stay on the streets.

“Yanukovych is under immense psychological pressure,” said Masha Lipman, an analyst at the Carnegie Moscow center in Russia. “Who wouldn’t be? You see your country is getting destabilized and you’re powerless to do anything.”

Yanukovych went on sick leave today with an “acute respiratory condition” and high fever, his office said in a statement. His absence may allow him to avoid signing the amnesty law and another that canceled anti-protest legislation on Jan. 28 at the demand of the opposition, said Oleksiy Haran, a professor of comparative politics at the Kiev-Mohyla Academy.

‘Shame! Shame’

“This further complicates the situation,” Haran said by phone today from Kiev. “From the formal point of view, he can continue procrastinating.”

The president had threatened to dissolve parliament if lawmakers approved an opposition-proposed amnesty bill with no conditions, Volodymyr Oliynyk, a member of Yanukovych’s Party of Regions, told Hromadske television. The approved version expires in 15 days if activists do not relinquish control of the government buildings, according to a copy of the law on parliament’s website.

At the end of the marathon session that stretched into the freezing night, the law was passed amid applause from government-allied lawmakers and shouts of “Shame! Shame!” from the opposition. It was backed by 232 deputies, with 11 votes against and 173 abstentions. Yanukovych’s Region’s party controls the 450-seat assembly with support from the Communists.

The emergency legislative session ended without meeting opposition demands for constitutional amendments to curb presidential powers. They maintain a demand for a snap presidential election as the only way to end the crisis.

Sick Leave

The yield on Ukraine’s dollar-denominated government debt due in 2023 rose by 50 basis points to 10.08 percent at 1:18 p.m. in Kiev, to the highest level since Dec. 13, data compiled by Bloomberg show. The hryvnia weakened to 8.4850 per dollar from 8.4750 yesterday to its lowest since September 2009.

The opposition says six protesters have died -- three from gunshot wounds -- and a thousand have been injured in protests, while authorities have detained at least 116 on suspicion of taking part. A policeman wounded in a clash on Jan. 27 in southern Ukraine also died, the Interior Ministry said.

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.

Possible Sanctions

The U.S. House of Representatives Foreign Affairs Committee approved a resolution expressing support for revoking visas for several Ukrainian officials and calling for the president and Congress to consider additional sanctions against those who had authorized or engaged in the use of force.

Catherine Ashton, the EU’s foreign policy chief, said she was “shocked” at reports of violence and missing people tied to the rallies after at least two activists said they’d been kidnapped and beaten by unknown abductors.

“We are very worried about people who appear to be missing,” she told journalists in Kiev yesterday.

German Chancellor Angela Merkel called Putin yesterday to urge him to help stop the violence, according to a statement from her office. The EU and Russia have accused each other of meddling in Ukraine. Putin said “outside interference” was unacceptable, according to the Kremlin’s website.

Aid Needed

Polish Prime Minister Donald Tusk traveled to Brussels to appeal to EU states to improve an offer of aid to Ukraine comparable to a Russian offer. Russia agreed to lend its western neighbor $15 billion and give it a one-third discount on natural gas prices after Yanukovych rejected the EU pact.

Ukraine got the first $3 billion tranche and is waiting for $2 billion more “in the nearest future,” Serhiy Arbuzov, who replaced Azarov as acting premier and will lead the cabinet until Yanukovych names a new one, told a government meeting.

Ukraine needs the funds to repay more than $1 billion to the International Monetary Fund by Feb. 12, the Washington-based lender’s data show. The country had $20.4 billion in international reserves at end-December, down from as much as $38.4 billion in 2011.

Putin told his cabinet at a meeting outside of Moscow today “it’s reasonable” to wait until a new cabinet emerges before extending more aid to Ukraine, a key transit route for Russian gas shipments to Europe.

Unpaid Bills

Ukraine’s opposition wants to possibly revert to the 2004 constitution under which parliament picks the prime minister. At present, that decision is up to Yanukovych, who has 60 days to install a new government.

Russian Prime Minister Dmitry Medvedev said Ukraine wasn’t paying its gas bills even with the lower price, which “seriously changes the situation.”

In an echo of trade difficulties the two countries faced last August, Ukraine’s exporters are again facing delays on the border after Russia introduced additional requirements, imposed fees and subjected them to more detailed inspections, Ukraine’s Employers Federation said on its website.

With temperatures reaching minus 22 degrees Celsius (-8 degrees Fahrenheit) in Kiev, activists at Independence Square, known as Maidan, said they would stay until Yanukovych resigns.

“We will stay at Maidan until Yanukovych goes away and those who shot people and beat them are punished,” said Ivan, 27, an agriculture entrepreneur from Kremenchug in central Ukraine, who refused to give his full name in fear of reprisals.

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