Ukraine leader clings to European goal despite Putin

(Reuters) - Ukrainian President Petro Poroshenko has secured a temporary peace in the troubled east which he says gives him a chance to move Ukraine towards its dream of a place in Europe - but Russia's Vladimir Putin still holds cards that could thwart him.

And, a month away from a parliamentary election which he hopes will bring a strong coalition of support for sweeping reforms, Poroshenko's peace plan is coming under greater criticism at home - even from some of his erstwhile allies.

A U.S. refusal to provide Kiev with high-precision weaponry required to beat Russian-backed separatists on the battlefield, and the European Union's move to defer implementation of part of a key pact with Ukraine to appease Moscow have spelled the clear message that Western support for Kiev has its limits.

Meanwhile, Poroshenko's plan to give three years of limited self-rule to the separatists in the east - an idea which he still has to fully "sell" to his pro-Western political elite - is being undermined by the independence-minded rebels. They say they want no part of any grand scheme from Kiev.

The main problem for Poroshenko is that his dream of taking Ukraine into the European mainstream is fundamentally opposed by Putin who appears set on doing all he can to make the former Soviet republic of 46 million ineligible as a European partner.

This makes any further steps taken by Putin potential game-changers. Both NATO and the Kiev military say there has been a significant withdrawal of Russian forces from inside Ukraine after an intervention in August they say tipped the balance of power on the ground towards pro-Moscow rebels.

But analysts say Putin's broad agenda is unchanged: to destabilise Ukraine's internal situation and render it unfit as a potential ally for the EU and NATO alike.

"Russia is not trying to stabilise the situation. It is trying to destabilise the situation," said James Sherr, an associate fellow of the London-based Chatham House think tank.

FAILED OFFENSIVE

As setbacks have mounted, Poroshenko, an optimistic-minded billionaire who made his fortune in the confectionery business, has sought to play down the failed military offensive to crush the separatists and talk up the effects of the ceasefire he called on Sept. 5.

Daily military casualties are down to zero and the "the most dangerous part of the war" is over, he announced last week.

He told Ukrainians to be braced for sweeping reforms after the Oct. 26 election which would rid Ukraine of its legacy of endemic corruption and unlock acceptance into mainstream Europe, allowing Ukraine to apply for EU membership in 2020.

Rejection of the reforms, he warned, would mean that Ukraine's future would be "alone with Russia".

Ukraine's relations with the EU are at the core of the Russia-West geopolitical tussle over the country's future.

It was rejection of the association pact by Poroshenko's Moscow-backed predecessor Viktor Yanukovich that caused mass unrest, leading to Yanukovich's downfall, the subsequent annexation of Crimea by Russia and rebellions in the east.

While Poroshenko was seeking last week to focus people's minds on the distant dream of European integration, criticism became more strident of his plan to grant temporary limited self-government to the separatist-minded parts of the east, an area known as the Donbass.

"It is clear to everybody that there is no agreed vision of a future Donbass which is the key criticism today of the peace settlement process," Serhiy Taruta, a billionaire industrialist and Kiev-appointed governor of Donetsk region, much of which is held by separatist forces, wrote on Friday.

"If a status quo is fixed and the occupied territories are given 'special status' and a part of Ukrainian sovereignty is delegated, then this will wind the situation back to May when the separatist movement had only just started getting going," he wrote in the online newspaper Ukrainska Pravda.

"How are we expected to regard the Donbass now? As a 'grey zone' of lawlessness and anarchy? As a time-bomb on a slow release? Or as an 'experimental field'?," Taruta asked.

Plans for a 30-km (19-mile) wide "buffer zone", from which the warring sides will remove artillery and other heavy armaments, have only added to fears in Kiev of a permanent "no-go" zone being created.

Poroshenko says he will not allow a breakaway entity to develop within Ukraine's borders outside Kiev's control, though the rebels are already planning to stage their own elections in early November.

Taruta's comments and similar views expressed by other players in Kiev, though, suggest Poroshenko will have to fight hard to secure a strong mandate from next month's election.

"The big problem he has - if not today, but will have - is not in eastern Ukraine. It is the ground disappearing under his feet in Kiev. The basis of support for Poroshenko is already fragmenting," said Sherr of Chatham House.

BATTLEFIELD REVERSES

It was big battlefield reverses in late August - caused, Kiev says, by the direct intervention of Russian forces - that forced Poroshenko to abandon hopes of a military victory.

Ukrainian media reports say hundreds of government soldiers were killed in a crushing defeat at Ilovaisk, east of the city of Donetsk, details of which have still not been disclosed by the Kiev military.

"It was a serious psychological and political blow," said independent analyst Volodymyr Fesenko of the Penta think-tank. "There is the feeling that it was this that made Poroshenko begin to negotiate."

Despite the ceasefire, Kiev still shows signs of war fever, sitting oddly in a pleasant European capital of chestnut-lined boulevards which only two years ago hailed international friendship and goodwill as it staged a European football fest.

Of the 3,500 or so people killed in six months of conflict, more than 1,000 are serving soldiers.

Supermarkets provide boxes for financial help to soldiers at the front. TV channels run army recruitment campaigns and social advertising lauding the servicemen and women on the front line.

Public meetings rarely take place without a moment of silence for a new generation of "martyrs" and heroes. Poroshenko himself proudly announced that his own British-educated son, Oleksiy, was a volunteer in one of the pro-Ukrainian battalions serving in the east.

NO U.S. ARMS

Despite Poroshenko's impassioned plea for arms in the United States - he told the U.S. Congress that "blankets" alone were not enough to win the war - he came away empty handed from talks with U.S. President Barack Obama.

So even if his peace plan collapses, a resumption of the offensive against the separatists to take back the initiative does not look to be on the cards.

"If we go along a military path again, I don't think we will liberate the Donbass again. We'll lose it," Fesenko said.

Putin's next move is hard to guess though Poroshenko says he hopes Russia will not back the rebels' plans for separate elections on Nov. 2 in their 'people's republics'.

Poroshenko said he expects to meet the Kremlin leader in the next three weeks somewhere in Europe and he may learn more then of Putin's intentions.

Poroshenko's course of action now seems to be calming the waters at home in the run-up to the election and then securing a strong parliamentary base to be able to move ahead with his peace plan with renewed confidence.

In the meantime, he is leaving it to his hawkish prime minister Arseny Yatseniuk to make the running in denouncing Russian action. Speaking to Reuters in New York, Yatseniuk said Russia was preparing to use natural gas supply as a weapon.

"They want us to freeze," he said, adding that he did not trust Putin at all.

Poroshenko's worry though is that the Russians, despite the effect of U.S. and EU sanctions, continue stealthily to have a stake in Ukraine's future.

When preliminary talks began on Friday to mark out a potential buffer zone, Russia sent a team of 76 officers, according to Ukrainian sources and the Organization for Security and Cooperation in Europe (OSCE) - but their presence was flatly denied by Moscow.

Securing a delay in the implementation of a free trade deal between the EU and Ukraine until January 2016 was seen by some as a coup for Russian diplomacy.

This appears to imply a role for Russia in discussing Ukraine's future ties with the bloc and underscores Moscow's determination to try to put a brake on the pact even though it has been ratified by the Ukrainian and European parliaments.