Possible Breakthrough in Ukraine; Truce Shattered in Kiev; Day of Mourning; Ukraine's Future; Ukraine Sanctions; Ukrainian Economic Instability
MAGGIE LAKE, HOST: It's the closing bell on Wall Street, US stock markets closed higher for the fourth time in five days. It's Thursday, the 20th of February. Ukraine's bloodiest day, more than 70 are killed in clashes between protesters and police. Europe's foreign ministers describe their horror at how the crisis is unfolding and react with sanctions. Plus, Facebook spends a huge amount of money on a messaging start-up. I'm Maggie Lake. This is QUEST MEANS BUSINESS. Good evening. A possible breakthrough in Kiev tonight. The Ukrainian government has agreed to hold early elections and form a new government within ten days. Constitutional reform will come this summer. That's according to a statement released by Polish prime minister Donald Tusk. Poland's foreign minister has been part of the ongoing talks with President Viktor Yanukovych, opposition leaders, and EU officials. The agreement comes after the deadliest day Ukraine has seen in decades. Earlier, gunfire erupted in Independence Square. The opposition says government snipers fired into the crowds, killing 100 people. Demonstrators desperately carried the wounded away from the clashes. Ukrainian officials admit that police used firearms but say it was only for protection. The government reports three police officers died in the clashes and say several others were injured and held hostage by protesters. The EU today slapped sanctions on those responsible for the violence. Within the past hour, the Ukrainian parliament has declared Wednesday's so- called anti-terrorist operation illegal. The motion ordered security forces to return to their stations. Phil Black is live in Kiev following all the developments for us, and Phil, this has been such a fluid situation all day. Now we are hearing there is yet another at least hope for a breakthrough. How is it being received by the protesters?</s>PHIL BLACK, CNN INTERNATIONAL CORRESPONDENT: I think it'll be received cynically for the moment, Maggie. Those talks are still underway between President Yanukovych and the three European foreign ministers. And it appears that the Polish prime minister has perhaps let the cat out of the bag a little bit earlier, but we're linked to wait until these talks finish and we hear precisely what language they use, the nature of the commitment, precisely what President Yanukovych has agreed to do. Because these things that we're hearing about, the idea of constitutional change, early elections, both perhaps presidential and parliamentary, these are the things that the people in this square have been screaming for, to some degree fighting for, for something going on three months now. And up until now, President Yanukovych hasn't gone for any of those suggestions, has shown absolutely no willingness. In fact, as we know, what we've seen particularly this week is a dramatic escalation in the violence that has been used to attempt to suppress some of the protest crowd at least. So, we'll just need to wait to see precisely what happens, what sort of language Yanukovych uses, and to what extent he is genuinely committing to this idea of changing the constitution and potentially throwing the future of his government back to the Ukrainian people to decide precisely who they would like to lead this country and what direction they want the country to travel in, Maggie.</s>LAKE: You're right, it would be a huge change, if it were to be the case. Phil, we hear that music that we have heard so often playing behind you, I'm assuming some sort of national anthem or something coming from the protesters' camp. About the protesters, themselves, we have seen violence on both parts, and much blame being spread around. If there is an agreement, if it does hold true and there are going to be elections, is there a feeling that the protesters will act with unity and will abide by some truce if their demands are met? Is there a sense, in other words, that those in leadership position have control over the crowd, if you will?</s>BLACK: There is certainly, perhaps, an extreme right-wing faction to the protesters that are not answerable to the mainstream opposition party leadership and haven't really been throughout this crisis. And they do tend to be the more militant in the crowds. These are the ones that really take the fight directly to the Ukrainian security services, the ones that have been most aggressive. But what they have been most aggressively fighting for are pretty much the same demands that the rest of the larger, more moderate crowds have been demanding as well, and that is an end to the Yanukovych government, an end to his leadership of this country. So, if he does come out of these meetings tonight with the European foreign ministers and say, "I will give the people of Ukraine the chance to decide on who should be president in the near future," then it's possible they could be satisfied with that, although, there is no doubt, that is the element of the crowd that will be toughest to satisfy. Certainly for the broader majority of the crowd -- and we're talking about, really, those that make up the vast thousands that have been regularly filling this square peacefully and who do, to a much greater degree, follow the mainstream leadership of those opposition political leaders -- that's something they would very satisfied with and it's very likely that a good many of them would consider it a win. Having said that, I think they would be cynical about Yanukovych's willingness to go to an election, and then they would look very, very strictly at the way any possible election was conducted. They would be certainly on the lookout to ensure that such a vote would be conducted absolutely fairly, Maggie.</s>LAKE: Phil Black for us, live tonight in Kiev. Thank you so much, Phil. Ukraine is holding a day of national mourning for those killed. Ukraine's ambassador to the United States (sic), Yuriy Sergeyev, told CNN the only way out of this crisis is to get all parties to the negotiating table.</s>YURIY SERGEYEV, UKRAINIAN AMBSSADOR TO THE UNITED NATIONS: The violence should be stopped, and what is needed, the wisdom and responsibility from all the sides. The first demand of all the people from around the world, to stop the violence. And then, to return to negotiations. This is badly needed. We are too far with this crisis. When people are being killed for nothing.</s>LAKE: Alexander Kliment is director of emerging market strategy at Eurasia Group. He joins us tonight in the studio. Alexander, thank you so much for being here. Obviously, this is a fast-moving situation --</s>ALEXANDER KLIMENT, DIRECTOR OF EMERGING MARKET STRATEGY, EURASIA GROUP: Right.</s>LAKE: -- it appears that we have a major development, and yet, we heard Phil say there's deep cynicism. How much hope should we hold out that this will represent a new chapter in Ukraine's struggle?</s>KLIMENT: Yes, I think this is certainly a welcome bit of positive news after what's been a pretty tragic few days. I think it's important to treat this news with a certain amount of caution, though. The underlying conflicts that are going on in Ukraine right now, which are increasingly zero-sum conflicts, remain, and those are basically three conflicts. The first is between Yanukovych and the opposition. The second is between Eastern Ukraine, which is traditionally more oriented towards Russia, and Western Ukraine, which is traditionally oriented more towards Europe. And thirdly, of course, the kind of geopolitical scale, Russia on the one hand and the West on the other. Until --</s>LAKE: Which, of course, has been complicating things.</s>KLIMENT: Has been drastically complicating things. I think the point to remember is that a credible and stable solution to this problem, the crisis in Ukraine, is not achievable unless all three of those dimensions are credibly addressed. So, I think that's the thing we have to look for in the coming days.</s>LAKE: My first question is, does there appear -- if there is going to be an election, if there is going to be a new government, does there appear that there is an alternative to step into this void?</s>KLIMENT: I think fresh elections would certainly be a step in the right direction. I would point out, though, that irregardless -- irrespective of how the situation plays out, you could still have a governance crisis in Ukraine. If an opposition government comes to power, it's possible that elements in Eastern Ukraine supported by Russia could sort of reject central government authority. Obviously, if Yanukovych stays in power, Western Ukraine might do the same with respect to the central government. So, no matter how this situation turns out in the medium term, we still have the prospect of some kind of governance challenges in Ukraine over the next six to nine months at least.</s>LAKE: Against a backdrop with an economy that is incredibly weak, some would say in free fall, which is not going to make that any easier. When it comes to the larger geopolitical scope, as the protesters and the government have been trading accusations at each other, so have the EU, the West, the US, and Russia. Do those powers need to come together as well around the table to try to find a solution, a way forward for Ukraine? How critical would that be?</s>KLIMENT: I think it's absolutely essential. It's absolutely essential. And the way that the Russians on their side and the West, the EU and the US on their side, have been speaking about this appears to leave very little room for compromise on this issue. So, we can get a domestic settlement that holds for some time, but as long as these external powers are still jockeying and exerting influence over what's going on in Ukraine, we could continue to have a problem for some time.</s>LAKE: And Alexander, we're out of time, but you are -- you do cover emerging markets as well. I know there's some fear that this could spread beyond Ukraine, this unrest. Is that some something that you're concerned about?</s>KLIMENT: Well, I think the two things that people are looking at from the market perspective are one, is there a heightened risk of Ukraine defaulting on its foreign debt, which is a big issue? And second of all, I think, in the second order of concern is would there be some kind of risk to energy shipments that go across from Russia to Europe via Ukraine in oil and gas? I think those are the two key things as far as contagion is concerned.</s>LAKE: All right, Alexander Kliment from the Eurasia Group. Thank you so much for joining us tonight.</s>KLIMENT: Thank you for having me.</s>LAKE: The European Union sent a firm signal to Ukraine on Thursday by imposing sanctions. The EU has agreed to freeze assets and ban visas for those responsible for human rights violations. Export licenses on equipment that could be used for internal repression, such as anti-riot gear, have been suspended. EU foreign policy chief Catherine Ashton said those who perpetrated the violence should be brought to justice. She added that the Ukrainian government needs to take its responsibility extremely seriously in that regard. Britain's foreign secretary, William Hague, said there was widespread horror in the EU and the UK at the loss of innocent life in Ukraine. He says the European Union's priority now is stopping the violence.</s>WILLIAM HAGUE, BRITISH FOREIGN SECRETARY: It is not right to describe protesters as terrorists. A great many of them, of course, are simply seeking a better future for their country. And I think the European Union today has to act in a way that helps to stop the violence, because without an end to the violence, there will be no other progress of any kind in Ukraine, either politically or in the desperate economic situation of the country. So, helping to stop the violence is the immediate priority.</s>LAKE: CNN's Jim Boulden joins us now, live from CNN London with the latest on the sanctions. Jim, we talked about what some of them were. What are the EU trying to achieve here? And of course, this also, this news happened before the very latest development that reported at the top of the show, it should be pointed out.</s>JIM BOULDEN, CNN INTERNATIONAL CORRESPONDENT: Yes. It's very fast- moving, isn't it? So, what happened is, if you think about it, there are three foreign ministers in Kiev, that's the French, the German, and the Polish. They were meeting face-to-face with the president, and they were meeting with opposition leaders. Meanwhile, their counterparts all gathered in Brussels this afternoon to sort of put up another sort of unified voice to tell Ukraine we really mean this, you have got to do something to stop the violence. And so, they didn't do that much, really. They did exactly what the US did, which is say they will ban travel for some officials and they will freeze their assets if they can get a hold of those assets in the EU. So, Ukraine officials who they would say could not travel within the European Union. Now, I think that's more symbolic than anything else, but it shows a first step for sanctions, not economic sanctions. Obviously, they don't want European companies selling anti-riot gear to the Ukraine government right now, so they want to try to freeze that as soon as possible. But it's really showing a unified voice. You heard William Hague, there, very strong terms, indeed, condemning -- on the part of the UK, condemning what's going on in Ukraine. So, they're trying to say this is the first step, we can do this very quickly. Obviously, there are other things they can do. And Maggie, I should tell you, even though Ukraine obviously is outside the European Union, the EU does spend a lot of money in Ukraine because it's a neighbor. Think about it, of course, next to Poland. They've tried to help them with their -- airlines, and they're trying to help them with their flight controls and modernize a lot of their infrastructure when it comes to their subway systems, for instance. That's money coming from the European Investment Bank to try to help Ukraine bring up its level of infrastructure. So, there is a lot of money spent in Ukraine, so there is more the EU can do if they need to do it. Maggie?</s>LAKE: And Jim, they're speaking with a unified voice, but some have said that that voice has come too late, they didn't do enough earlier when they may have had the ability to exert more influence, and that they're really behind the curve here. Is that criticism fair?</s>BOULDEN: Well, you think about what's happened the last few hours. You're talking about President Obama, you're talking about Chancellor Merkel, President Putin, all on phones talking to each other. You've got foreign ministers on the ground going back and forth, literally going back and forth. Obviously, this has come after we saw the massive -- the number of deaths today, the tragic number of deaths this morning in Kiev. So, they are obviously on the ground trying to stop this. The problem is, your guest beforehand pointed out, is that Ukraine is split between East and West in their views. And of course, a lot of this happened because the European Union was negotiating with Ukraine to have closer political and economic ties, to bring Ukraine ever closer to the European Union, which of course, this parts of Ukraine who want to look more towards Moscow did not like that. And the guest was really, really careful about this, it's important to note: a lot of oil and gas come through Ukraine from Russia, and Russia controls the price of what Ukraine pays as well. So, there's a carrot and stick on both sides, and it is very economic-oriented, Maggie.</s>LAKE: Economic-oriented and very complicated. Jim Boulden, than you so much for joining us tonight. Still to come on QUEST MEANS BUSINESS, scenes like these in Kiev are sapping confidence in Ukraine's economy, and there wasn't much of that to begin with. We'll examine the damage the current unrest is doing to the country's prospects.