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. Last Updated: 07/27/2016

Angry Parliament Sacks Ukraine's Government

ReutersYuriy Yekhanurov, bottom, and Cabinet members watching the parliament's no-confidence vote in Kiev on Tuesday.
KIEV -- Ukraine's parliament sacked the government on Tuesday over a costly gas deal with Russia, pushing the country deeper into crisis just two months before a parliamentary election.

President Viktor Yushchenko, whose euphoric rise to power has been marred by a weak economy, bitter feuds and graft scandals, said the vote to ditch his second government in just over three months was unconstitutional.

But his spokeswoman said he had no plans to cut short a trip to Kazakhstan for the inauguration of that country's leader, where on Wednesday he plans to hold talks with President Vladimir Putin.

It was anger over Ukraine's agreement last week to pay twice as much for Russian gas as it did in 2005 that triggered the no-confidence vote, backed by 250 members of the 450-seat parliament.

The gas deal came only after rancorous negotiations led the Kremlin to cut off Ukraine's supplies for two days.

That, said some analysts, gave a boost to pro-Yushchenko politicians in the run-up to what will certainly be a closely fought March 26 parliamentary poll, at the cost of his pro-Moscow opponents.

"This [latest vote] is an attempt by the political opposition in Ukraine to seize political initiative from President Yushchenko's camp ahead of the March election," said CSFB economist Sergei Voloboyev.

"The opposition lost the initiative to the government after the successful resolution of the gas crisis with Russia, with the popularity of the pro-Russian political leaders suffering most as a result of Russia's decision to cut gas supplies."

Yushchenko, in comments published on his official web site, said that Prime Minister Yuriy Yekhanurov and his government would stay on until the election.

Yekhanurov pledged to do all he could to prevent any impact on the gas deal with Russia, the battle over which briefly disrupted supplies to major European customers at the start of the year.

The resolution passed by the parliament had no word on the fate of the contract, but analysts said they doubted it would affect it for the moment.

A Yushchenko spokeswoman said the president planned to challenge the vote in Ukraine's Constitutional Court.

However, the court is currently paralyzed by not having its full complement of judges because the parliament has blocked Yushchenko's nominees.

It is the latest blow to Yushchenko, who has spent his first year in office battling poor economic growth and corruption scandals.

Bankers said they expected the latest political instability would push down the hryvna in trading on Wednesday.

Officials said a new government could emerge only after the poll.

"The absurdity of the situation is that neither the president nor the parliament will be able to form a new government until a new parliament is elected," Justice Minister Serhiy Golovaty told reporters after the vote.

A main driving force behind the no-confidence vote was former Prime Minister Yulia Tymoshenko. She was sacked by Yushchenko last September after the partnership that swept them to power in the Orange Revolution turned sour amid accusations of corruption.

Tymoshenko will run against Yushchenko's allies in the March polls, and she has seized every opportunity to criticize the government of Yekhanurov, the technocrat who replaced her.

In the vote, which required a simple majority, she joined forces with opposition parties representing the pro-Moscow administration that was ousted at the end of 2004.

Tymoshenko has vowed to fight the gas deal, signed by Moscow and Kiev on Jan. 4. It was her leaking of what her web site claimed was the contract details that fueled parliamentary anger over the deal. She alleges that what was hailed as a five-year deal was in fact only for six months.

Ukrainian and Russian officials have not commented on the allegations.

 Ukraine's sovereign bonds slumped Tuesday after the parliament sacked Yekhanurov's government. However, traders and analysts said the market reaction was indicative of a wait-and-see attitude, with requisite price weakness, but not panic selling.

"There is a lot of uncertainty about the details of the gas deal. Investors are still holding off until it is clear how much Ukraine will have to pay in future," said Zaolt Papp at ABN Amro in London.

 Ukraine's key stock index had its biggest decline in seven months following the vote Tuesday, Bloomberg reported. Chemical producer Concern Stirol and pipemaker VAT Nyzhnodniprovsky Truboprokatny Zavod led the slide.

The PFTS Index fell 2.1 percent to 345.55 at the close of trading in Kiev, the biggest drop since June 17.