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You have to feel a bit sorry for Ukrainian President Viktor Yanukovych. His decision to walk away from a comprehensive trade and association pact with the European Union was based on sound political reasoning. The deeply unpopular leader wants to stay in power and preserve his family's accumulating wealth. And the deal with the EU wasn't going to do either for him, despite the obvious long-term benefits for the Ukraine's recession-wracked economy and cash-strapped government.

In fact, the conditions attached to the EU package – and the threat of tough Russian economic sanctions, if it were signed – would undoubtedly hasten his political demise. The Europeans were insisting on the release from prison of his main rival Yulia Tymoshenko, a former prime minister, as well as costly economic, environmental, democratic and other reforms and a strong dose of fiscal discipline to enable it to qualify for badly needed financial aid.

Most of Mr. Yanukovych's waning political support resides in the Russian-speaking eastern part of Ukraine, which is heavily dependent on Russian trade. A sharp reduction in exports to Russia has already pummelled the region, and a full-fledged trade war would prove devastating. So he has re-embraced Mother Russia, in the hope that improved trade flows and access to cheaper natural gas and Russian financial help will mollify frustrated business leaders and somehow quiet the infuriated demonstraters demanding his government's resignation.

While thousands of protesters have taken to the streets of Kiev in a replay of the Orange Revolution nearly a decade ago, Mr. Yanukovych has also been playing his version of the China card in Beijing, where he trumpeted billions of dollars in Chinese investment deals but received no assurances of further loans.

But the embattled President would do better listening to what the markets are saying. And it isn't: "Keep up the good work."

Ukraine has to come up with close to $20-billion in new financing through 2014 to meet bond obligations and cover the cost of natural gas imports. Investor fears that Russia will offer cheaper gas to Ukraine for ditching the EU deal, as well as concerns that shipments through the country to the European Union could be disrupted by protests, drove Russia's OAO Gazprom's share price to a three-month low this week.

Spreads on Ukrainian government and corporate debt have widened dramatically out of fear of a default. Stock prices have plunged and the currency has come under severe pressure. To prevent a potential run on deposits, the central bank has taken the unusual step of assuring people that their savings are secure, and the government insists it is meeting all of its debt payments on time, even as reserves dwindle.

The question is how long that will last if the street protests become more widespread, the markets slam the door on Ukrainian debt and the struggling economy grinds to a near-halt?

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