* Azarov has been loyal lieutenant since Yanukovich elected
* Parliament votes to repeal anti-protest legislation
* Moves seen as concessions aimed at taking sting out of
* Ukraine in grip of street protests for two months
By Richard Balmforth and Pavel Polityuk
KIEV, Jan 28 Ukrainian Prime Minister Mykola
Azarov resigned on Tuesday while deputies loyal to President
Viktor Yanukovich, acting to calm violent street protests,
back-tracked and overturned anti-protest laws they rammed
through parliament 12 days ago.
The first real concessions by Yanukovich since the crisis
erupted two months ago brought cheers from several thousand
demonstrators on Kiev's Independence Square, focal point of the
protests. Opposition leaders said they would continue to harness
street power to wring more gains.
"We have to change not only the government, but the rules of
the game as well," declared boxer-turned-politician Vitaly
Klitschko. "We are sure the struggle will continue," he said.
The 66-year-old Azarov tendered his resignation as
parliament met for an emergency session to work out a deal that
would satisfy the opposition and end protests in the capital
Kiev and in other cities in which six people have been killed.
Yanukovich quickly accepted his resignation and that of his
cabinet. First Deputy Prime Minister Serhiy Arbuzov will step in
as acting prime minister and other ministers will stay on in
caretaker roles until a cabinet is formed.
Azarov, a loyal lieutenant of Yanukovich since the president
was elected in February 2010, said he was stepping down to help
find a political compromise "for the sake of a peaceful
settlement of the conflict".
A Russian-born hardliner who has referred to the protesters
as "terrorists", Azarov was publicly humiliated by Yanukovich's
offer at the weekend to give his job to former economy minister
Arseny Yatsenyuk, another opposition leader, in an effort to
stem the rising protests against his rule.
The opposition has been calling consistently for the
resignation of the Azarov government since the crisis started.
But Yatsenyuk and other opposition leaders rejected Yanukovich's
offer of top government posts, seeing it as a trap intended to
compromise them in front of their supporters on the streets.
The steward of the heavily-indebted economy through hard
times and recession, Azarov backed the November decision to walk
away from a free trade pact with the EU - the move which sparked
the mass street protests. He took the heat in parliament,
defending closer ties with Russia in a stormy debate.
REPEAL OF LAWS
Parliament went into emergency session on Tuesday with
ministers loyal to Yanukovich saying they would press for a
state of emergency to be declared if the opposition leaders did
not rein in protesters and end occupation of municipal and
government buildings across the country.
But then Yanukovich loyalists, clearly under pressure from
the president and his aides to make a U-turn, voted to repeal
anti-protest legislation they had pushed through on January 16.
It was these laws, banning virtually all form of public
protest, which led to street violence between radical activists
and police in which six people were killed.
Opposition leaders sought to keep up the pressure on
Yanukovich, with Yatsenyuk calling on him to swiftly sign the
repeal of the laws into force. Klitschko said opposition
lawmakers would now press for amnesty for detained activists and
a return to a 2004 constitution reducing the president's powers.
"These decisions which parliament has adopted are good but
it's only a little progress. We won't leave here until the
system and the constitution have been changed," said Ivan, 45, a
protester from the Lviv region, who was at a barricade leading
to Independence Square.
The crisis has revealed a sharp divide within Ukraine
between those mainly from the Russian-speaking east who favour
warmer ties with former Soviet master Moscow and those in the
west who want better relations with the EU.
In turning away from Europe, Azarov's government had argued
that improving ties with Russia was urgently needed to win a
financial bailout. Moscow responded last month with an offer of
$15 billion in loans and discounts on gas.
But the chaos could now put that lifeline in jeopardy.
Ratings agency Standard & Poors cut Ukraine to CCC+ on Tuesday.
"The downgrade reflects our view that the significant
escalation of the political turmoil in Ukraine makes the
expected financial support package from Russia less certain
should the government of President Yanukovych fall," it said.
In Brussels, President Vladimir Putin promised Russia would
not cut off Ukraine if its government changed.
"Regarding your question whether we will review our
agreements on loans and the energy sector if the opposition will
take power ... No, we will not," Putin answered a reporter's
question after three hours of talks with EU leaders.
The aid was to "support the people of Ukraine, not the
government. It's the people, the common people that suffer."
Though the protest movement began because of Yanukovich's
U-turn on policy towards Europe, it has since turned into a mass
demonstration, punctuated by clashes with 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 protesters confront police lines at Dynamo football
stadium some distance away.
A leader of 'Right Sector', a radical nationalist group
involved in violent clashes with police, said members would
stick to a truce which has held for several days as long as
authorities adopt a conciliatory approach.
"If they (the authorities) make a move to compromise we will
reduce our activities," Petro Yarush told reporters.
Talk of a state of emergency being declared in the former
Soviet republic of 46 million made the European Union's foreign
policy chief, Catherine Ashton, hastily bring forward a visit.
She was due to arrive in Kiev on Tuesday night.