Ukrainian Prime Minister Mykola Azarov stepped down on Tuesday, in a concession by President Viktor Yanukovych to the protests led by the country’s right-wing opposition. Parliamentary deputies also voted by an overwhelming majority to annul an anti-protest law they had passed two weeks ago, severely limiting free speech and the right to assembly.

Mykola Azarov is a close crony of Yanukovych and maintained close links with Russian President Vladimir Putin. In his period in office, he has been repeatedly implicated in corruption scandals, going back to his services as finance director under former President Leonid Kuchma.

Azarov also won the hatred of Ukrainians more recently by publicly defending the activities of the armed police and the regime’s notorious Berkut militia units in their violent crackdown on anti-government demonstrators.

Azarov’s resignation means the automatic dismissal of the Cabinet of Ministers, a key demand of the right wing, pro-EU opposition. Following Azarov’s resignation, leaders of the opposition made clear, however, that they would maintain their campaign for the resignation of President Yanukovych.

“It’s not a victory. It’s only a step to the victory,” said Vitali Klitschko, who leads the Ukrainian Democratic Alliance for Reforms Party (UDAR), which has close links with Germany’s conservative Christian Democratic Union.

Klitschko’s comment was echoed by Andriy Pavlovsky, a leading member of the opposition Homeland Party of jailed oligarch Yulia Tymoshenko. “It’s a small step to resolve the confrontation,” he said.

With the support of the US State Department, the EU and the German government, the opposition triad of UDAR, Homeland and the neo-fascist Svoboda party are demanding immediate presidential elections and the adoption of the 2004 constitution that gives parliament more powers at the expense of the president.

The US and EU are intent on replacing Yanukovych with an administration dedicated to defending their strategic interests and the wealth of the country’s oligarchs, and ready to implement austerity and privatization policies demanded by the IMF, and international banks.

The resignation of the Ukrainian government followed a campaign of intense pressure by the EU and the US, which have both intervened directly in the protests in Kiev on behalf of the opposition. Additional pressure on the government came from the camp of oligarchs traditionally associated with Yanukovych, in particular Rinat Akhmetov. Akhmetov is the country’s richest man and issued a statement on his company website criticizing the violence used by the government to suppress the protests.

According to a report in the Guardian newspaper Ukrainian oligarchs are increasingly concerned that Yanukovych’s policy of enriching the group of his immediate associates and relatives “threatened to make Ukraine a pariah state…..that more than anything is a risk for their (the oligarchs’) businesses, most of which have gone international.”

For its part the European Union used their annual summit on Tuesday to step up pressure on the Russian government—the most important political partner of the Yanukovych regime.

Discussion on the political crisis in the Ukraine dominated talks held at the annual EU-Russia summit also held on Tuesday. The two-day summit had originally been planned for December. However, it was postponed after the start of the protests in Kiev, during which leading EU figures, together with the German foreign minister and leading US politicians openly sided with the opposition’s calls to bring down Yanukovych.

In the event, the summit in Brussels on Tuesday was reduced to a single meeting of a few hours on just one day. European Council president Herman Van Rompuy, European Commission head Jose Manuel Barroso, and EU foreign affairs head Catherine Ashton met with Russian President Putin and Russian Foreign Minister Sergei Lavrov plus a few aides, for what were described as “frank discussions.”

After the summit, Putin signaled concessions, implying that he would accept talks with pro-EU forces and possibly a pro-EU regime in Ukraine: “For us, this is not a taboo, to speak with representatives of all political powers in Ukraine.” He even claimed Russia had “agreed about everything” with former US-backed Prime Minister Yulya Tymoshenko, an oligarch Yanukovych has jailed.

Putin also endorsed austerity measures and structural changes in the Ukrainian economy demanded by the EU as a way of guaranteeing Russia’s $15 billion planned loan to Ukraine would be repaid: “What is of principal importance to us is that the Ukrainian economy is credit-worthy. We want the government of Ukraine to make structural changes so that we would have a guarantee to get back our credit … we want to make sure that this money comes back.”

A dinner originally planned for Monday evening was cancelled. Immediately after the summit, the EU’s leading diplomat Catherine Ashton flew to Kiev for meetings with both Yanukovych and opposition leaders.

Slovak Foreign Minister Miroslav Lajcak commented: “We are moving from one summit to another with very little progress…under the surface there is more and more confrontation in many areas.”

Differences between Europe and Russia have been intensifying in the recent period with Moscow recently complaining to the World Trade Organisation about punitive taxes imposed on a number of Russian products exported to the Europe. Considerable frictions also exist over energy policy.

Europe is heavily dependent on energy supplies from Russia. Attempts to achieve more independence from Russian energy floundered, however, last summer when the EU was forced to abandon its own Nabucco pipeline project in favour of Russia’s Gazprom’s South Stream natural gas pipeline. Smarting under the loss of its pipeline, the EU is conducting its own antitrust probe against Gazprom, which it accuses of monopolizing its market position.

On foreign policy, Moscow has also been at odds with leading EU nations and the US on the latter’s policy of aggressive intervention in Libya, Syria and the broader Middle East.

At the heart of the conflict with Europe, however, is Russia’s attempt to develop its sphere of influence among a number of former Soviet and Eastern European states, which cut across plans of US and EU strategists to establish their geopolitical dominance of Eurasia.

In line with plans to develop a Eurasian Union, Moscow recently signed custom union deals with Armenia and Serbia. Just three days before the contract with Serbia was signed, Yanukovych rejected EU pressure for an Association’s Agreement and struck his own deal with Russia.

Although it has not the slightest intention of accepting Ukraine into full membership, the EU bureaucracy is intent on opening up the country to intensified exploitation by western companies and banks and rolling back Russian influence. At the end of the summit Tuesday, European Commission head Jose Manuel Barroso made this clear when he reaffirmed that the EU would brook no compromise with Russia on the issue of Ukrainian independence.