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Ukraine Opposition to Keep Up Protests After Russian Deal

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Independence Square
Protesters rest at a barricade set by pro-European opposition activists on Independence Square in Kiev on Dec. 18, 2013. Photographer: Viktor Drachev/AFP/Getty Images

Dec. 19 (Bloomberg) -- Ukraine’s opposition vowed to keep up street protests against President Viktor Yanukovych after he sought to calm anger at a $15 billion Russian bailout by pledging to raise wages before his 2015 re-election bid.

Thousands of pro-European Union demonstrators spent the evening listening to anti-Yanukovych speeches on Independence Square, also called Maidan, urging them not to back down. Barricades were fortified to prevent a repeat crackdown, while protesters cooked on the central square in open fires, sang songs and tried to stay warm in near-freezing temperatures. Vitali Klitschko, a former boxing champion, called for a massive New Year’s Eve celebration to be held on the square.

“We should not leave Maidan,” said Arseniy Yatsenyuk, the head of jailed ex-Prime Minister Yulia Tymoshenko’s party. “He wants us to leave badly. Victory will not happen soon. But we will have victory because we are following the right path.”

Ukrainians are staging the biggest protests in almost a decade after Yanukovych rejected an EU integration accord last month and instead chose deeper ties with Russia, which had opposed the deal. The ex-Soviet state, a key east-west pipeline transit nation, is struggling with its third recession since 2008 and dwindling foreign reserves.

Russian Bailout

Yanukovych will make a statement in a live television broadcast at midday, after returning to Kiev from Moscow where he signed agreements with Ukraine’s former Soviet master meant to bypass a deal with the International Monetary Fund and the EU. Leaders of the 28-nation bloc will meet today in Brussels for an end-year summit that includes defense issues.

EU leaders will give support to “European hopes” of Ukrainian people without giving promises about membership possibilities, according to Russian newswire Itar-Tass, which didn’t say where it got the information. They will also demand freedom for “all opposition supporters” and offer to mediate talks between the government and opposition, it said.

In the U.S., the Senate Foreign Relations Committee approved a resolution calling on President Barack Obama and Congress to consider sanctions if Ukraine’s government resorts to violence against protesters. Sanctions would include visa bans and asset freezes of responsible individuals.

Warsaw Talks

Russian Foreign Minister Sergei Lavrov is visiting Warsaw today to discuss “cooperation strategy” between the two countries, and the new German Foreign Minister Frank-Walter Steinmeier will visit Poland later in the day. His talks with Polish counterpart Radoslaw Sikorski and President Bronislaw Komorowski will include the situation in Ukraine.

According to the Russian accord, Ukraine will issue $15 billion of Eurobonds for Russia to buy, with a $3 billion tranche of two-year debt possible in 2013, according to Russian Finance Minister Anton Siluanov. It will also get a one-third cut in the price it pays its neighbor for natural gas, Putin announced

“Putin is giving him cash to buy out his power base,” Jan Techau, the director of the Brussels office of the Carnegie Endowment, said by phone. “This is Russia’s strategy for between now and election day so that the economy doesn’t tank.”

The yield on Ukraine’s dollar denominated bonds due 2023 was unchanged at 8.94 percent in Kiev today. The cost to insure Ukraine’s debt against non-payment with five-year credit default swaps dropped for a third day to 897.435, compared with 897.630 yesterday, according to data compiled by Bloomberg. The hryvnia weakened to 8.2900 against the dollar from 8.2850 yesterday.

Election Risk

Yanukovych, who faces elections in March, 2015, has damaged his popularity with the EU snub and overseeing the use of force against protesters, according to a poll published by Tyzhden magazine.

He’d lose to any of the opposition candidates if a vote was held now, with his worst result against Klitschko, who polled 46.9 percent, compared with 28.6 percent for Yanukovych, the Nov. 28-Dec. 7 survey of 2,013 people by Perspektyva showed. It had a 2.2 percentage-point margin of error.

Prime Minister Mykola Azarov defended Yanukovych’s decision to accept the Russian assistance, saying that agreeing instead to an IMF loan would have resulted in a surge in household heating prices, the hryvnia’s devaluation and cuts to salaries and pensions.

‘Bankruptcy, Collapse’

“What would have happened without these agreements, if the government hadn’t taken the difficult but necessary decision to halt the signing of the EU accord?” he said yesterday. “The answer is obvious -- bankruptcy and social collapse. That’s the present Ukraine would have got for New Year.”

By refraining from IMF support, Ukraine has “avoided policy conditions ultimately aimed at helping revive its economy,” Fitch Ratings said yesterday.

Putin and Yanukovych said they didn’t discuss a Russian-led customs union that’s a rival to the EU deal.

Russia’s intention is “crystal clear,” Yatsenyuk said yesterday on Bloomberg Television. It wants to “restore the Soviet Union, which is called the customs union.”

U.S. Senator Chris Murphy, a Connecticut Democrat, said at a Bloomberg Government breakfast that “there are conditions attached” to the Russian money, whether Yanukovych know it or not.

Klitschko, the head of the opposition UDAR party and a parliament member, accused Yanukovych of using strategic Ukrainian companies “as collateral” for the Russian agreement.

Fortified Streets

As well as a resumption in the EU pact, protesters are demanding the government’s dismissal after violent clashes with police on Nov. 30 and Dec. 1. Demonstrators have rebuilt barricades around the square that were removed by police last week, with fortifications including barbed wire, snow-filled sacks reinforced with logs, lumber and old tires.

European leaders cautioned that the Russian aid may not benefit Ukraine in the longer term. Russia’s emergency loans raise the risk that Ukraine will further delaying “urgent economic reforms and necessary EU modernization,” Swedish Foreign Minister Carl Bildt said on his Twitter Inc. account.

German Chancellor Angela Merkel said she expects the Ukrainian leadership to adhere to democratic standards. In London, Prime Minister David Cameron told Parliament “the world is watching what the Ukraine authorities have done and are contemplating doing.”

Ukraine’s agreements with Russia don’t prevent an EU association treaty and Brussels is ready to sign it as soon as Ukraine is, the news service Interfax cited EU foreign-policy chief Catherine Ashton as saying. She also said she received a letter from three opposition leaders with “ideas” on how to resolve the crisis, Interfax reported.

‘Buying Time’

The financing allows Russia to keep control of Yanukovych as he gears up for the 2015 ballot, according to Joerg Forbrig, senior program officer for Central and Eastern Europe at the Berlin bureau of the German Marshall Fund of the U.S. Winning the vote will be difficult without “massive fraud,” he said.

“Russia wants to buy time,” Forbrig said by phone. “Putin’s keeping him on a very tight leash. It’s enough to keep him ticking over but not enough to allow him to walk away.”

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

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

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