KIEV (Reuters) - Pro-Western parties will dominate Ukraine's parliament after an election handed President Petro Poroshenko a mandate to end a separatist conflict and steer the country further out of Russia's orbit into Europe's mainstream.
Poroshenko held preliminary power-sharing talks with Prime Minister Arseny Yatseniuk on Monday after their political groups led other pro-Western forces committed to democratic reforms in sweeping pro-Russian forces out of parliament. "The main task is to quickly form a pro-European coalition for carrying out agreements with the EU," Yatseniuk said at a meeting with election observers.
International observers from the Organization for Security and Cooperation in Europe (OSCE) gave a further lift to the pro-Western Kiev leadership, saying Sunday's election had "largely upheld democratic commitments" despite the conflict in the east.
It was "an amply contested election that offered voters real choice and (had) a general respect for fundamental freedoms,"Kent Harstedt, OSCE special coordinator, told a news conference.
Despite a dire result for parties sympathetic to Russia, Moscow was not immediately confrontational. Foreign Minister Sergei Lavrov said he thought Russia would recognise the election.
But after months of conflict and turmoil there was no euphoria from Poroshenko's allies. The president faces huge problems: Russia opposes his plans to one day join the European Union, a ceasefire is barely holding between government forces and pro-Russian separatists in the east, and the economy is in dire straits.
Russian President Vladimir Putin can also still influence events, as the main backer of the rebels in the east and through Moscow's role as natural gas supplier to Ukraine and the EU. He could also remove trade concessions from Kiev if it looks West.
Poroshenko's first task is to cement an alliance with Yatseniuk's People's Front, which was running neck and neck with his bloc on about 21 percent support after more than half the votes on party lists were counted.
Ukrainska Pravda, an online newspaper, calculated that an alliance between those two leading blocs would still not give Poroshenko and Yatseniuk a majority in the assembly. They are likely to turn to Selfhelp, a like-minded party with just over 11 percent of votes. Final results for party list voting and in single constituency seats are due on Oct. 30.
The tandem between the 49-year-old confectionery magnate Poroshenko and the professorial Yatseniuk, who has gone out ahead as an anti-Russian hawk in recent weeks, was emerging as a relationship likely to dominate the new political scene.
Several commentators said Yatseniuk, a favourite in the West for his stewardship of the war-ravaged economy, would probably remain prime minister to see through deep and possibly unpopular reforms, though he once called the job "political suicide".
Poroshenko and his allies are trying to restore normalcy to the sprawling country of 46 million and draw a line under a year of upheaval that began with street demonstrations against Poroshenko's pro-Russian predecessor, Viktor Yanukovich.
Yanukovich was overthrown in February in what Russia called a "fascist coup". Moscow responded by swiftly seizing and annexing Ukraine's Crimea peninsula and backing separatist rebellions in eastern regions.
More than 3,700 people have been killed in the conflict in the east, including 298 passengers on a Malaysian airliner shot out of the sky over pro-Russian rebel-held territory.
Moscow has also halted gas supplies to Ukraine in a row over the price and unpaid bills, causing alarm in the EU which gets a third of its gas needs from Russia, half of this via Ukraine.
The Kiev government says it is hoping for modest economic growth next year after a 6 percent decline in 2014, but the World Bank expects the economy to continue shrinking.
In line with measures agreed with the IMF, Yatseniuk's government has cut budget expenditure and let the Ukrainian hryvnia float. The currency has lost about 40 percent of its value against the dollar since the start of the year.
The economic decline has been aggravated by the fighting in the east, where the Kiev military said two Ukrainian soldiers were killed on Sunday as they tried to break through separatist lines in an armoured vehicle to relieve a government checkpoint.
Heavy shelling was also reported on the outskirts of the rebel stronghold of Donetsk on Monday despite a ceasefire.
Some allies of Yanukovich will be in parliament: the latest figures put the Opposition Bloc of ex-Fuel Minister Yuriy Boiko on 9.80 percent, easily enough to put the party into parliament.
But other traditional allies of Russia, such as the communists, flopped and the make-up of the assembly seemed likely to spell future tensions with Moscow.
It is the first time the communists are not in parliament since Ukraine won independence from the Soviet Union in 1991.
After months of beating back the separatists, Ukraine's troops faced sharp reversals in August, which Kiev and its Western backers say was caused by Moscow sending armoured columns with hundreds of troops to aid the rebels. Moscow denies intervening directly on the ground.
Since then, Poroshenko has said he will resolve the conflict only by political negotiations. NATO says Russia is still supporting the rebels in the east with soldiers and equipment.
Voting did not take place in areas held by the rebels or in Crimea. Separatists in the big eastern cities of Donetsk and Luhansk said they were ignoring the election and plan a rival vote on Nov. 2 to further their calls for independence.