• Bloomberg


Arseniy Yatsenyuk received lawmakers’ approval to remain Ukraine’s prime minister, clearing an obstacle for aid talks with the International Monetary Fund as the country grapples with a separatist insurgency in the east.

Yatsenyuk, 40, was backed by 341 lawmakers in the 450-seat legislature Thursday, the result of an alliance between five pro-European parties after elections on Oct. 26. The coalition is supported by 302 lawmakers.

Ukraine is struggling with the deepest recession since 2009 as the military conflict with pro-Russian militants in the eastern regions of Donetsk and Luhansk disrupts production in its industrial heartland. The government is seeking to draw $2.8 billion from a $17 billion IMF loan by year’s end to stabilize an economy ravaged by the insurgency, a 45 percent slump in the hryvnia and central bank reserves plunging to the lowest level in almost a decade.

“Our country is at war, people are in trouble,” Yatsenyuk told legislators before the vote. “It depends on us whether we can stop the external aggression from Russia.”

The Washington-based IMF ended a two-week mission Tuesday. The lender’s representatives will return to discuss disbursements once a government is formed, central bank Gov. Valeriya Gontareva said this week.

“Now there’s a proposal to form the Cabinet quickly,” Yatsenyuk said. “2015 will be more difficult than 2014. Let’s start working.”

Ukraine’s parliament will approve the whole Cabinet on Dec. 2, newly installed parliamentary Speaker Volodymyr Hroisman said after the vote.

The country must prepare for a long struggle to defeat the military threat it faces, President Petro Poroshenko told legislators at the opening session. There was no choice but to “militarize society to some extent” by raising defense spending, retaining conscription and restoring army training in schools, he said.

Ukrainian will be the country’s sole official language, the president said, a decision that risks fueling resentment among some Russian speakers in the east that their interests are ignored by the government in Kiev.

Poroshenko and Russian President Vladimir Putin spoke to each other about the conflict in a phone call Wednesday. The presidents discussed the situation in southeast Ukraine, according to a Kremlin statement. The two presidents last spoke on Oct. 31, according to their websites.

Yatsenyuk also spoke by phone Thursday with Russian Prime Minister Dmitry Medvedev, focusing on “questions of financial and economic cooperation between the two countries,” according to a statement issued by the government in Moscow.

As the European Union announced toughened penalties against Ukrainian separatists Thursday, with travel bans and asset freezes against 13 people and five organizations, German Foreign Minister Frank-Walter Steinmeier said that his country didn’t want to wreck Russia’s economy with sanctions imposed over the conflict.

“An economically isolated Russia, one that may face collapse, would not help improve security in Europe or in Ukraine, but would pose a danger to itself and others,” Steinmeier said in a speech in Berlin. EU officials who seek to ratchet up sanctions because they are having an effect suffer a “dangerous misunderstanding,” he said.

Russia poses “no threat to anyone” and is intent on avoiding “geopolitical games, intrigues and especially conflicts, no matter how much someone would want to drag us in,” Putin said at a meeting with military commanders Wednesday in the Russian resort of Sochi. “It’s necessary to reliably protect Russia’s sovereignty and integrity and the security of our allies.”

Yatsenyuk became prime minister after three months of deadly protests toppled pro-Russian President Viktor Yanukovych in February. He then described his government as being on a “kamikaze” mission of unpopular reforms to meet the IMF’s terms amid what he called a “war with Russia.” Russia, which denies military involvement in its neighbor’s conflict, cut natural gas supplies in June over pricing and debt disputes.

“There are still numerous avenues that both sides can explore in seeking to de-escalate the current extreme tension,” Simon Quijano-Evans, the London-based head of emerging-market research at Commerzbank AG, said by email. “The alternative would certainly not be a ‘frozen conflict’ but one that would escalate further on both sides, with the added likelihood of more outlier risks.”

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