Ukraine’s Warring Sides Sign Accord to End Deadly Crisis

Photographer: Jeff J Mitchell/Getty Images

Anti-government protesters man barricades. Close

Anti-government protesters man barricades.

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Photographer: Jeff J Mitchell/Getty Images

Anti-government protesters man barricades.

(Corrects location of city in 10th paragraph. For more on the violence in Ukraine, click EXT2.)

Ukrainian President Viktor Yanukovych signed a peace agreement with opposition leaders that calls for early elections and reduced presidential powers in a bid to halt a deadly, three-month political crisis.

The pact, unveiled yesterday after all-night talks in Kiev with European Union foreign ministers, envisions a national unity government within 10 days. Lawmakers approved a return to the 2004 constitution, which would curb Yanukovych’s authority, and voted to free jailed ex-Prime Minister Yulia Tymoshenko. The president still needs to sign the measures.

At least 77 protesters and police were killed this week in clashes, the worst violence since the crisis began in November. The bloodshed prompted EU governments to threaten sanctions on Ukrainian officials and send envoys to hammer out the peace deal. The accord’s fate hinges on the official opposition’s ability to control the most radical anti-government activists.

“The guys with the petrol bombs and the guns aren’t accountable to the opposition leaders who signed this agreement,” Andrew Weiss, vice president for studies at the Carnegie Endowment for International Peace, said yesterday on a conference call from Washington. “Whether they can drive events on the ground back into the kind of awful clashes we’ve seen this week is really the big question mark at this point.”

Photographer: Genya Savilov/AFP/Getty Images

Ukrainian President Viktor Yanukovych. Close

Ukrainian President Viktor Yanukovych.

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Photographer: Genya Savilov/AFP/Getty Images

Ukrainian President Viktor Yanukovych.

‘Key Victory’

The crisis erupted Nov. 21, when Yanukovych rejected an EU integration pact and opted instead for $15 billion of Russian aid. Violence intensified this week in Kiev amid frustration among protesters that their demands for snap elections and governance changes were being ignored.

Speaking by phone, Oleksiy Haran, a member of the demonstrators’ Maidan Council, emphasized the constitutional change and new government as “the key victory.” Even so, opposition leader Arseniy Yatsenyuk, who heads Tymoshenko’s party, pointed to further tensions.

Protesters will stay at the Independence Square camp in Kiev that they built in November, according to Yatsenyuk, who said Yanukovych would be given no assurances on his fate. Vitali Klitschko, the former world boxing champion who heads the UDAR party, said those responsible for the bloodshed would be held to account.

Pravyi Sektor, the radical nationalist group that’s advocated violence and supplied activists to man the front lines of the protesters’ defenses, said any peace deal must include a removal of the current regime.

‘Yanukovych’s Dismissal’

“Pravyi Sektor is not laying down its arms,” the group’s leader, Dmytro Yarosh, said late last night from the stage in Kiev’s central Independence square, surrounded by ski-masked supporters and in front of the bodies of activists killed this week. “The main demand, Yanukovych’s dismissal, was not met.”

Yanukovych went to Kharkiv, a city about 480 kilometers (300 miles) east of Kiev, said a senior U.S. State Department official after talking to Ukrainian Foreign Minister Leonid Kozhara. The official spoke in a briefing yesterday on condition of anonymity. Interfax news service reported the president may take part in a meeting of lawmakers from eastern and southern Ukraine, areas where he enjoys popular support.

The crisis has taken its toll on the economy in Ukraine, whose gas pipelines are a key east-west transit route for energy. The country has endured three recessions since 2008.

Default Risk

Ukrainian stocks and bonds rebounded yesterday on prospects of a resolution. The yield on the Ukrainian government’s dollar bonds due 2023 fell 96 basis points to 10.136 percent, having reached a record-high 11.42 percent two days before, according to data compiled by Bloomberg. The UX Index of equities gained for a second day.

Standard & Poor’s warned yesterday that Ukraine risks default without “significantly favorable changes” in its political crisis and cut its credit rating to CCC, eight levels below investment grade. OAO Sberbank (SBER) is seeing a run on its automated teller machines in Ukraine, German Gref, the head of Russia’s No. 1 lender, told reporters yesterday in Moscow.

Russia has halted the $15 billion bailout for its neighbor because of the unrest. Finance Minister Anton Siluanov said yesterday in an interview in Hong Kong that Russia has “many questions” on how Ukraine can repay the aid.

Tymoshenko Release

In parliament, dozens of deputies from the president’s ruling Party of Regions defected. More than 300 of the legislature’s 450 lawmakers voted to revert to the 2004 constitution, fire acting Interior Minister Vitaliy Zakharchenko and free Tymoshenko from her seven-year sentence. There’s no timeline for her release.

Presidential elections, which had been scheduled for March 2015, must be held by December, according to the agreement signed by Yanukovych and the opposition. The EU welcomed the deal as the only peaceful and democratic way out of the crisis.

“It is now the responsibility of all parties to be courageous and turn words into deeds for the sake of Ukraine’s future,” EU President Herman Van Rompuy said in a statement.

Polish Foreign Minister Radek Sikorski, who joined his German and French counterparts in Kiev, told the opposition that martial law would be imposed if the peace deal was spurned.

“You’ll have the army,” he said. “You’ll all be dead.”

Sniper Shots

The EU ministers arrived in Ukraine Feb. 20 as a truce brokered the previous day between activists and riot police crumbled. Security forces were given the green light to fire live rounds, and sniper shots felled protesters and police officers. Each side accused the other of escalating the clashes.

Russia blames the EU and the U.S. for emboldening protesters to take up arms, with Foreign Minister Sergei Lavrov telling reporters in Baghdad Feb. 20 that extremists were trying to provoke a civil war. Yesterday, his ministry urged a referendum on the constitutional switch.

“Such a momentous process for Ukraine as constitutional reform should be carried out with the involvement of all of the political powers and regions,” it said on its website.

Russian President Vladimir Putin sent Russia’s human-rights ombudsman, Vladimir Lukin, to Kiev for talks with the opposition. Lukin left without signing the EU offer, Interfax said yesterday.

‘Concrete Action’

While welcoming the agreement, the U.S. will keep up pressure on the Ukrainian government to ensure “immediate implementation of the initial steps,” White House Press Secretary Jay Carney said yesterday in a statement.

“We remain prepared to impose additional sanctions as necessary,” Carney said.

U.S. President Barack Obama and Putin spoke by phone for an hour yesterday, with the conversation focused on the need to ensure Ukraine’s economic and political stability, according to a U.S. State Department official, who briefed reporters on condition of anonymity.

Russian banks have more than $40 billion in exposure in Ukraine, the official said, making the country’s economic outlook a priority. In the call, initiated by the U.S., Obama and Putin agreed on the need to implement the still-fragile agreement quickly, get all sides to refrain from violence, and stabilize the economy, the official said.

IMF Favored

The Obama administration hopes a national unity government will be empowered and prepared to work quickly with the International Monetary Fund because that would unlock other sources of global support, the official said, citing the continued tense situation in Kiev’s central square.

Under the accord, protesters are to unblock streets and squares and relinquish control of public buildings seized across the country, according to a copy of the pact published on the president’s website.

On Independence Square, Vladimir Zvadyuk, a police colonel who had traveled with about 40 colleagues from the the western region of Lviv to protect the protesters, showed no signs these conditions would be met by all.

“If Yanukovych had announced early presidential elections a month ago it would have been a compromise,” 40-year-old Zvadyuk said. “It’s not enough anymore.”

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

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net

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