Acting Ukraine President May Seek New Government Today

Ukraine’s acting president, Oleksandr Turchynov, told parliament he expects lawmakers to vote today on a national unity government led by a prime minister people would trust.

Turchynov, an opposition politician who was elected parliament speaker Feb. 22, indicated yesterday that he expects to move quickly to fill the government vacuum so officials can seek the economic aid needed to fend off default, even as Russia questioned the legitimacy of the political transition.

“The new government’s task is to stop the country’s slide, to stabilize the currency rate, to ensure timely salary and pension payments, to win back investors’ trust and to create new jobs,” Turchynov said. “Another priority is to return to the European integration path.”

The temporary government in Kiev said it needs $35 billion in financial assistance as the U.S. and the European Union pledged aid for a new administration. Russia’s Foreign Ministry said opponents of deposed President Viktor Yanukovych broke a Feb. 21 peace agreement and threatened the stability of the nation.

Yesterday, lawmakers moved quickly to appoint Stepan Kubiv, the ex-chairman of Lviv-based VAT Kredobank, to head the central bank after voting out Ihor Sorkin.

Economic Challenges

The monetary authority this month introduced capital controls to halt the hryvnia’s slide after the currency fell to a five-year low against the dollar. Kubiv plans to invite an International Monetary Fund mission, the Unian news service reported, without giving details.

“The economic and political challenges that Ukraine faces are enormous,” Lubomir Mitov, chief economist for emerging Europe at the Institute of International Finance, which represents more than 400 institutions globally, said on a conference call with reporters. “To avoid a complete collapse in the coming weeks, Ukraine needs money now.”

With Kremlin-backed Yanukovych on the run from an arrest warrant, payments from a $15 billion Russian bailout stand suspended. An international aid package is taking shape as demonstrators control Kiev and jockeying gets under way before early presidential elections scheduled for May 25.

While a new government needs to be established before Ukraine can receive aid, the first payments may arrive next week, Elmar Brok, the head of the European Parliament’s foreign affairs committee, told reporters in Kiev yesterday.

Bonds Gain

Ukrainian assets have benefited from the momentum for financial aid, with the yield on the government’s dollar bond maturing in 2023 falling 93 basis points, or 0.93 percentage point, to 9.26 percent, the lowest since Jan. 28 as of 5:56 p.m. in Kiev. The UX Index of stocks soared 15 percent, the most since May 2010, while the currency, which is managed by the central bank, weakened 4.3 percent to 9.3500 per dollar.

Acting Finance Minister Yuriy Kolobov proposed calling an international conference of donors with the EU, the U.S. and other countries. The $35 billion financing package is needed for this year and next, the ministry estimated.

The EU has been working on an international economic support package for Ukraine for the short, medium and long term, European Commission spokesman Olivier Bailly said yesterday. Bailly said he isn’t “personally aware” of a donor conference being organized.

EU foreign policy chief Catherine Ashton met with Turchynov yesterday, and U.S. Deputy Secretary of State William Burns is due in Kiev today. French President Francois Hollande discussed Ukraine in a phone call yesterday with Russian President Vladimir Putin.

Economic Lifeline

Ukraine’s new leaders are looking for a new lifeline as their Russian neighbor signaled changes to its political and financial support for the country.

Russia will honor all its agreements with Ukraine, including an accord for cut-price gas shipments that Yanukovych signed in December, Russian Prime Minister Dmitry Medvedev said, according to comments posted on a government website. Even so, Medvedev said he had questions about the legitimacy of many Ukrainian state institutions and warned that his country’s interests are under threat.

White House spokesman Jay Carney said Turchynov’s actions are legitimate since Yanukovych has “packed up his things” and “is not actively leading the country at present.”

The conflict in Ukraine has put the U.S. and Russia on opposing sides, though Carney sought to play down echoes of earlier East-West tensions.

East-West Tensions

“This is not a restoration of the Cold War, this is about the Ukrainian people and their future,” he told reporters yesterday in Washington.

“It’s in nobody’s interest to see further violence and instability in Ukraine,” Carney said. “Certainly not in the interests of the Ukrainian people; not in the interests of Russia, Europe or the United States.”

Meanwhile, jostling began among Ukrainian politicians seeking future leadership roles.

Mykola Tomenko, a member of former Prime Minister Yulia Tymoshenko’s Batkivshchyna party, said she was a candidate for the premiership, along with party leader Arseniy Yatsenyuk and billionaire ex-Economy Minister Petro Poroshenko. Tymoshenko, who was imprisoned more than two years ago for abuse of power, later ruled out the role for herself, as did Vitali Klitschko, who heads the UDAR party.

‘Mass Murder’

Ukraine spiraled into crisis in November when protesters took to the streets to oppose Yanukovych’s rejection of a deal to deepen ties with the EU. Violence culminated last week in fighting in central Kiev that killed 82 people before a peace agreement brokered by EU foreign ministers ended the clashes and triggered Yanukovych’s flight from Kiev.

Yanukovych went to Crimea in southern Ukraine after his plane in the eastern city of Donetsk was denied permission to leave the country, acting Interior Minister Arsen Avakov said on his Facebook page. Stopping at a private residence also in the country’s south, Yanukovych was denied entry by state guards and departed with his entourage “in an unknown direction in three cars,” he said.

“A criminal case was opened into the mass murder of civilians,” Avakov said. “Yanukovych and other officials have been declared wanted.”

In Ukraine, the political crisis polarized sentiment between its western and central regions bordering the EU and those in the south and east that are home to more Russian speakers and ethnic Russians.

‘Grave Mistake’

While people toppled statues of Vladimir Lenin across the country in protests, according to Ukraine’s Channel 5, more than 2,000 rallied for closer ties with Russia in the southern city of Odessa. In Kerch, also in the south, marchers replaced a Ukrainian flag at the mayor’s office with Russian and Crimean flags, Unian reported.

French Foreign Minister Laurent Fabius said in an interview on France 2 television today that European countries must be vigilant over a possible fracturing in Ukraine.

White House National Security Adviser Susan Rice said Feb. 23 that the U.S. would work with European partners to help finance Ukraine’s economic recovery, while warning Russia that any insertion of its troops would be “a grave mistake.”