The government of Ukraine took a big step backward today — and then fled the field — in the face of growing unrest in Kiev and across the country. The parliament controlled by President Viktor Yanukovich repealed the law that banned political demonstrations on public land, which Yanukovich had hoped to use to bully his opposition into silence. His Prime Minister and entire Cabinet then tendered their resignations:

There were growing signs Tuesday that Ukraine’s opposition movement was gaining ground in its efforts to remake the country, with the resignation of the prime minister, approval of an amnesty bill for protesters and the repeal of harsh new laws restricting freedom of speech and assembly.

Ukraine’s parliament, called the Verkhovna Rada, invalidated the anti-demonstration laws hours after Prime Minister Mykola Azarov resigned. Passage of the laws Jan. 16 had triggered violent protests in the capital city, Kiev, following weeks of demonstrations against government corruption and the closer ties to Russia favored by President Viktor Yanukovych.

The parliament also passed an amnesty bill Tuesday that would drop criminal liability for protesters who agree to leave the government buildings they have occupied during the demonstrations. Vacating the buildings has been a key government demand.

In another retreat, Yanukovich has now begun negotiating to keep his job, while turning it into a nearly powerless post … as long as he retains immunity from prosecution:

Yanukovych also said he would be willing to cede considerable power to parliament as part of a negotiated deal. Some of his opponents have suggested that he would be content to stay on as a figurehead if that is the only way to keep his job — and his immunity from prosecution.

A deal with the opposition would mean a stinging defeat to Russian President Vladi­mir Putin, who strove to keep Ukraine from building closer relations with the West.

Russia had earlier threatened to renege on a $15 billion aid pledge if Ukraine reversed course and the opposition toppled Yanukovich’s government. Vladimir Putin reversed course today on that threat:

Russian President Vladimir Putin said on Tuesday it would honor its obligations to lend Ukraine $15 billion and reduce its gas prices even if the opposition formed the next government.

“Regarding you question whether we will review our agreements on loans and the energy sector if the opposition will take power … No, we will not,” Putin told a news conference after talks with European Union leaders in Brussels.

This came after the EU sent a signal to Putin that their patience on his meddling in Ukraine had come to an end:

Russian President Vladimir Putin and the European Union’s top two officials were set to hold “clear the air” talks in Brussels on Tuesday after months of growing tension over Ukraine and trade and energy disputes.

Instead of the normal two-day summit, the EU decided to cut out dinner with Putin on Monday night, sending a message to the Russian leader that it is no longer “business as usual”, with relations at their lowest point in years.

The summit will now involve around three hours of face-to-face discussions between Putin, European Commission President of Jose Manuel Barroso and European Council President Herman Van Rompuy, over and after lunch. …

“There is a need for a certain amount of straight talking, to clear the air perhaps, to clarify where we think this relationship is going,” a senior EU official told reporters ahead of the summit, speaking on condition of anonymity.

Putin’s foreign policy adviser Yuri Ushakov told reporters in Moscow it was “high time for a frank and detailed conversation, including about our joint view of the prospects for Russia-EU relations”.

Putin’s position in Ukraine is slipping badly now, and he’s going to have to come up with a Plan B after Yanukovich, especially with his ally now trying to hang onto a golden parachute. Either Putin will have to accept dealing with a EU-directed Ukraine, or he’s going to have to roll tanks into Kiev, and those days — thankfully — have long passed. He’d better start making nice with the opposition, and the EU.