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German minister snubs Ukraine leaders on Kiev visit

People gather in front of the Ukrainian cabinet of ministers building during a rally to support EU integration in Kiev December 4, 2013. REU
People gather in front of the Ukrainian cabinet of ministers building during a rally to support EU integration in Kiev December 4, 2013. REU

By Richard Balmforth and Thomas Grove

KIEV (Reuters) - Germany's foreign minister met Ukrainian opposition leaders at their protest camp in Kiev on Wednesday, in a snub to President Viktor Yanukovich, who triggered mass street demonstrations by spurning a pact with the EU and seeking closer ties with Moscow.

As pro-EU demonstrators packed the main square, the crisis took a further toll on Ukraine's fragile economy, with the central bank forced to support the currency and the cost of insuring the country's debt against default rising further.

The United States backed Ukrainians' right to choose their future, but Russia criticized what it called the demonstrators' aggressive actions and said outsiders should not interfere.

Tension was high in the capital as protesters confronted ranks of black-helmeted riot police in front of the main presidential offices and Prime Minister Mykola Azarov accused the opposition of trying to provoke violence.

Ukrainian officials went to Moscow in search of aid to avoid a financial meltdown, while Yanukovich is in China, also seeking economic assistance.

Ukraine faces huge problems in financing an unwieldy current account deficit, with outside funding needs estimated at $17 billion next year to meet debt repayments and the cost of imported natural gas.

Yanukovich's decision to abandon the deal with the EU at the last moment surprised European leaders, angered his critics at home and exposed Ukraine to pressure from financial markets.

Ukraine's central bank intervened again on the currency market to support the value of the hryvnia, amid concerns that its foreign reserves of $20 billion may not be sufficient to hold the line.

The cost of insuring Ukrainian government debt for five years rose to 1,097 basis points, near four-year highs. Levels over 1,000 indicate financial distress.

Adding to economic woes, severely depleted central bank reserves are putting Ukraine at risk of a balance-of-payments crunch.

PROTEST CAMP

On the eve of a meeting of the OSCE human rights body in Kiev, German Foreign Minister Guido Westerwelle met two Ukrainian opposition leaders - former economy minister Arseny Yatsenyuk and Vitaly Klitschko, a heavyweight boxing world champion turned politician - in a Kiev hotel.

The three then walked through the heart of the protest encampment around Independence Square - scene of the 2004-5 "Orange Revolution" - where people huddled round blazing braziers set up on the street.

In an appeal to Ukraine to reconsider its abrupt decision to turn towards Moscow and reject the deal with the EU, Westerwelle said: "We are not indifferent to the fate of Ukraine. We advocate European values and say that the door to the EU remains open. Ukraine should be on board with Europe."

U.S. Secretary of State John Kerry, in neighboring Moldova after skipping a visit to Ukraine, said Ukrainians should be free to choose their future.

‎"This is about building the bridges of opportunity and defining the future of your own hopes and aspirations," he said. "To the people of Ukraine we say the same thing‎ - you too deserve the opportunity to choose your own future.

Russian Foreign Minister Sergei Lavrov used a news conference at NATO headquarters in Brussels to criticize the Western response to the protests in Ukraine.

"I do not quite understand the scope of the aggressive actions on the part of the opposition," he said. "I hope that Ukrainian politicians will be able to bring the situation into a peaceful vein. We encourage everybody not to interfere."

TUG-OF-WAR

The crisis has again exposed a tug-of-war in Ukraine, which has oscillated between the EU and its former masters in Moscow since the Orange Revolution nine years ago overturned the post-Soviet political order.

With foreign ministers from the OSCE arriving in Kiev for a two-day meeting from Thursday, Azarov tried to project an image of being in control in the absence of Yanukovich.

Urging all sides to show restraint, Azarov said: "Everybody must realize that the country's constitution and laws are in force, nobody is allowed to violate them ... All those who are guilty of illegal acts will answer for them."

Despite the turmoil, Yanukovich has gone to China, where he visited the Terracotta Warriors archaeological site and an aircraft factory.

Beijing has already provided Ukraine $10 billion in loans, but China's foreign ministry made a noncommittal response to a query whether Beijing would provide any more aid.

In Moscow, the delegation led by a deputy prime minister, Yuri Boiko, was seeking lower prices for Russian natural gas and aid in closing gaping external deficits that could set off a balance of payments crisis.

"You are having quite an active political season," Prime Minister Dmitry Medvedev told Boiko. "Of course this is an internal matter, but it is very important that there be stability and order in the country."

Russian President Vladimir Putin had threatened financial sanctions against Kiev if it signed the agreement with the EU.

SUSPENDED SESSION

In Kiev, opposition deputies forced parliament to suspend its session, blockading the speaker's rostrum to further their demands for Yanukovich to dismiss Azarov and his team.

The challenge for the opposition is now how to sustain momentum and keep people on the streets as winter sets in.

Azarov's government survived an attempt to topple it in parliament on Tuesday in a rough encounter with opposition parties at which he apologized for police heavy-handedness against protesters.

Trying to defuse the protests, the government has defended its foreign policy switch by saying that it marks only a "pause" in moves to integrate further with Europe, rather than an about-turn. To underscore this point, Azarov said a delegation would also leave soon for Brussels.

Hundreds of flag-waving protesters rallied on Wednesday near official buildings, but found many routes blocked.

"We don't like this government, young people in Ukraine want to join Europe," said Christina Yavorskaya, a 21-year-old student. "There is no future with Russia."

"There is a chance of getting these bandits out of office. And as long as there is that chance, we'll be standing here," said Misha Skoropad, 38, from the western city of Lviv.

The opposition is a loose alliance of factions ranging from pro-EU liberals to hardline nationalists, without a galvanizing figure like Yulia Tymoshenko, who co-led the Orange Revolution but was jailed for abuse of power after Yanukovich became president.

Some analysts see Klitschko, leader of the Udar (Punch) party, emerging from the pack, though he is largely untested.

(Additional reporting by Natalia Zinets and Gareth Jones in Kiev, Katya Golubkova in Moscow, Sujata Rao in London and Megha Rajagopalan in Beijing; Editing by Peter Graff and Giles Elgood)

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