Thousands Protest as Ukrainian No-Confidence Vote Fails

Tens of thousands of Ukrainians marched to the presidential palace in central Kiev to demand the government be fired after the opposition lost a no-confidence vote in the parliament.

Demonstrations escalated on the 13th day of protests against President Viktor Yanukovych’s rejection of a European Union trade pact in favor of closer ties to Russia. Calls by protesters for the administration’s dismissal intensified even as Prime Minister Mykola Azarov pledged cabinet changes. Amid the worst political turmoil in almost a decade, Yanukovych left Kiev today for a trip to China.

“The key to solving the political crisis is in Yanukovych’s hands,” said Arseniy Yatsenyuk, the head of jailed ex-premier Yulia Tymoshenko’s party. “The people will stand peacefully at the presidential administration until the government resigns and snap elections” are called.

Russia and the EU are jostling for influence over the nation of 45 million, an essential transit route for Russia’s gas shipments to Europe. The opposition wants a cabinet free of influence from Russia, which supplies 60 percent of Ukraine’s gas, and expanded trade to pull the nation out of a recession.

RBC news service reported that 50,000 people joined the protests. The Interior Ministry said more than 10,000 people gathered at Independence Square and 2,000 police had been deployed. “The situation is calm in Kiev,” the ministry said in a statement.

Beating Drums

The central bank building was blocked by protesters who beat drums similar to those used in the 2004 Orange Revolution. Azarov urged protesters to end the blockade and the occupation of public buildings.

Ukraine is running out of options to repay $15.3 billion of maturing debt. Yields on Ukraine’s dollar-denominated notes due in June jumped above 19 percent for the first time yesterday after they were issued last year at 7.95 percent. They extended losses today, increasing the yield to 20.16 percent at 11 a.m. in Kiev before strengthening to trade at 19.58 percent at 7:05 p.m. in Kiev.

Yanukovych said his China trip is crucial for economic growth, adding that several deals are being readied, including on investments.

“There are a number of different agreements being prepared, including on investments in Ukraine,” he said yesterday in a TV interview. “Though the domestic situation isn’t the best for foreign trips. Still, if I don’t go our economy will lose.”

Energy, Aviation

Interfax reported that 20 agreements have been prepared for signing including on energy, aviation and farming.

Tim Ash, London-based chief emerging-markets economist at Standard Bank Group Ltd., said the China “visit is now seen as critical for his administration to secure loans to secure financing and improve the government’s negotiating position as it heads to talks with Russia over the next few weeks on cheap gas and financial assistance.”

Opposition leaders had called the vote against Azarov’s government even after Yanukovych said he still favors closer ties to the West after rejecting a European Union trade pact.

Azarov told the chamber before the vote that the president and the government “confirmed their commitment” to European integration and that a Ukrainian delegation will go to Brussels next week for talks. He said Ukraine would sign the EU pact after it reaches an agreement with Russia on its trade disputes.

‘Serious Reshuffle’

“I will draw strict conclusions of what happened when the police dispersed the protest,” Azarov told parliament, adding that he’ll carry out a “serious reshuffle” of his cabinet.

Opposition leaders vowed to carry on their fight to force the government from power.

“We are going to the president’s office to demand him to sign the decree to dissolve the parliament and to call for snap parliamentary and presidential elections,” Yatsenyuk said in a statement.

The street near the building where Yanukovych’s office is located was the site of police violence on Dec. 1 as the special police forces tried to prevent storming of the building by an unidentified group of young men. Yatsenyuk said the attack was prepared by the authorities to justify the crackdown on peaceful demonstrators.

“We will not go away,” said Vasyl Hnapkiv, 38, a local council member in the western city of Uzhhorod. “We will fight for our dream, for our better life for joining the EU. We will fight to change not only the government but also snap elections of the parliament and the president.”

In London, U.K. Foreign Secretary William Hague told lawmakers that the EU will keep to door open for Ukraine.

Russia Benefits

“I believe it would also be in the interests of Russia in the long term for Ukraine to have more open trade with the European Union,” he said. “The economic benefits that would flow to Ukraine would go on to benefit the Russian economy.”

Yanukovych, whose first electoral win in 2004 was overturned by the Orange Revolution, is once again the target of massive street demonstrations after he backed away from the planned signing of a so-called Association Agreement that would have lowered tariffs on at least 90 percent of Ukrainian goods shipped to the EU.

Italy’s UniCredit SpA, one of the biggest lenders in the country, considers that any solution to the crisis has to keep Russia’s interests in mind, said Gianni Franco Papa, the head of UniCredit’s eastern European business. In Ukraine, it has 435 branches, 6,200 staff and 3.3 billion euros ($4.5 billion) in total assets.

‘Ukraine is Europe’

“I believe Ukraine is Europe,” Papa told journalists in Vienna yesterday. “Sooner or later, an agreement will be found. I believe that any agreement will have to consider the interest of Russia. If we would not consider this we would be out of this world.”

Demonstrations, which turned violent for the first time on Nov. 30, have reflected anger over the administration’s decision to choose closer ties with Russia when two-thirds of Ukrainians favored better relations with the EU, according to the Brussels-based European Policy Centre.

Police urged all sides to exercise caution and refrain from violence on their website today. Yesterday, Yanukovych said the police crackdown four days ago that left more than 150 people injured can’t be justified. At least 265 people were hurt on Dec. 1 around the presidential administration building.

Consider EU Pact

Yanukovych said last night he would still consider a treaty with the EU as long as some areas of the proposed accord are changed.

“We want to change some conditions of the EU trade pact to protect the interests of our producers,” Yanukovych said. “I think we should not hold back and should protect our interests.”

The EU and Russia each buy a quarter of Ukraine’s exports.

As in the Orange Revolution in 2004, emotions are flaring in the debate whether Ukraine should tie its future to Russia or the EU. The protests gripping the country from Lviv to Kharkiv mark the biggest political crisis since the Orange Revolution.

“I knew this would fail,” Oleg, 47, a businessman, who declined to give his last name, said in an interview at today’s protest. “I think there will be a solution that will require force. There is no other way. These people won’t leave on their own; Yanukovych won’t give up power himself.’”


Russian President Vladimir Putin, who backed Yanukovych’s failed presidential candidacy during the Orange Revolution, said yesterday 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 yesterday. “For Ukraine, this is an absolutely new phenomenon. It’s a shock.”

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.

“It’s not the first crisis of the country. Whether they will be able to cope this time or not, we will know in a few days,” UniCredit’s Papa said.

Before it's here, it's on the Bloomberg Terminal.