UPDATE 2-Ukraine expects $2 billion tranche of Russian aid soon - acting PM
* Arbuzov has stepped in as interim PM
* Ukraine has already received $3 billion from Russian aid package
* Ukraine hit by street unrest for more than two months
By Natalia Zinets
KIEV, Jan 29 (Reuters) - Ukraine's interim prime minister pledged on Wednesday to work to limit damage to the economy from more than two months of turmoil and said he expected Russia to disburse a further $2 billion of aid "very soon".
The former Soviet republic has been gripped by mass street unrest since President Viktor Yanukovich walked away from a trade pact with the European Union last November, opting for closer economic ties with Russia which has brought it a $15 billion bailout package.
With Yanukovich and loyalist deputies in parliament now making concessions to defuse the crisis and with the resignation of Prime Minister Mykola Azarov, there had been speculation that Russia might slow or even halt the stream of aid.
But, following a pledge on Tuesday by Russian President Vladimir Putin that Moscow would honour its promise to extend $15 billion in credits and cheaper gas, Ukraine's acting prime minister Serhiy Arbuzov expressed confidence a second tranche of $2 billion would be released soon.
"We have already received the first tranche of $3 billion and expect to receive the second tranche of $2 billion very soon," said Arbuzov, chairing his first cabinet meeting as interim premier. The Russian credits are coming on stream via Ukrainian government-issued bonds.
Though the unrest began because of Yanukovich's U-turn on policy towards Europe, it has since turned into a mass demonstration, punctuated by violent clashes between radical protesters and police, against perceived misrule and corruption under Yanukovich's leadership.
Several hundred people camp round-the-clock on Kiev's Independence Square and along an adjoining thoroughfare, while more radical activists confront police lines at Dynamo football stadium less than half a kilometre away.
Anti-Yanukovich activists have also stormed into municipal buildings in many other cities across the sprawling country of 46 million. Hundreds of protesters in Kiev have occupied City Hall and the main agricultural ministry building.
In a big concession to the opposition and the protest movement, pro-Yanukovich deputies on Tuesday back-tracked and voted to repeal a series of sweeping anti-protest laws which they brought in hastily on Jan. 16 in response to increasingly violent clashes.
But opposition leaders, who include boxer-turned-politician Vitaly Klitschko, have won a mandate from protesters on the streets to continue to press for further gains from Yanukovich.
Opposition deputies and his loyalists at a crisis session of parliament were locked in back-room talks on Wednesday over the wording of a draft law under which protesters detained so far by police would be amnestied.
The opposition also wants a return to the previous constitution which would represent another significant concession since it would reduce Yanukovich's powers.
Speculation that Russia might cut the financial lifeline it has offered caused ratings agency Standard & Poors to downpeg Ukraine to CCC+ on Tuesday.
Arbuzov said the central bank was ensuring stability on the financial markets and he made no mention of any changes to his predecessor's policy of keeping the hryvnia pegged close to the dollar and maintaining subsidies for domestic gas - both criticised by the International Monetary Fund.
Referring to concessions made on Tuesday by Yanukovich and his loyalists in parliament, Arbuzov said: "During this search for a compromise and solution in society, the most important thing is to minimise the negative impact of this situation on economic processes."
"We must shun aggression ... the only path is dialogue," he said referring to talks between opposition leaders and the Yanukovich leadership.
The tense situation and talk by some of Yanukovich ministers of a possible state of emergency being declared has sparked alarm in the West and Western governments have urged Yanukovich to take all measures to de-escalate the situation.
The EU's foreign policy chief, Catherine Ashton, was in Kiev on Wednesday and was scheduled to meet Yanukovich and opposition leaders.
U.S. Vice President Joe Biden, in a telephone conversation with Yanukovich on Tuesday night, welcomed concessions made so far and encouraged him to look for more ways to compromise with the opposition, the White House said.