KYIV (Reuters) -- Defeated Ukrainian presidential contender Yulia Tymoshenko defiantly pursued her duties as prime minister today, but allies of her rival Viktor Yanukovych were in backstage talks to try to strike a deal on a successor.
Tymoshenko, who has alleged electoral fraud and refused to recognize Yanukovych as the legitimate winner of the February 7 runoff vote, came under fresh pressure to concede defeat when U.S. President Barack Obama led Western governments in congratulating him on his victory.
Yanukovych has urged her to step down.
But, despite the bad blood between them, the charismatic Tymoshenko may soldier on in her post even after he is sworn in as president in mid-March.
She may subsequently be forced into opposition if Yanukovych, who defeated her by only 3.5 percentage points, manages to forge a new coalition of forces in parliament to break the impasse.
In a country where parliament is a marketplace for deputies to trade favors and cut deals, forming a new coalition generates intense intrigue and fierce political bargaining.
Steel-and-banking billionaire Rinat Akhmetov, a member of Yanukovych's Party of Regions and one of his chief backers, hinted snap parliamentary elections might be the only way out.
"It seems to me that we will not succeed in forming one [a new coalition]. Perhaps I am wrong. Let's hope I am wrong," he was quoted as saying by the weekly magazine "Profile."
The ex-Soviet state of 46 million, which took a battering in the global crisis and badly needs stability for economic recovery, faces prolonged turmoil after a bitterly fought election that highlighted an east-west split in the country.
Yanukovych's win tilted Ukraine back towards Russia. Today, after an election dominated by smear and accusation, he left the door open to a possible deal with his rival.
The 59-year-old ex-mechanic was quoted as saying he was ready to open talks with her, on condition she apologized for the insults she heaped on him during the campaign. Tymoshenko had called him a coward and a "puppet of the oligarchs."
"A person who would go into negotiations with Tymoshenko without getting a public apology for what she said does not have honor," Interfax-Ukraine quoted him as saying.
Her camp has alleged "cynical" electoral fraud and is forcing a recount of votes in about 1,200 polling stations, further adding to the turmoil.
At stake particularly is resumption of International Monetary Fund lending under a $16.4 billion bailout program. This was crucial last year for the state's finances but was suspended because Ukraine breached promises of fiscal restraint.
Conflict between Tymoshenko, who as prime minister is the steward of the economy, and current pro-Western President Viktor Yushchenko has been a big factor spooking foreign investment.
This hardly seems likely to end if Tymoshenko remains prime minister for any length of time under Yanukovych.
If, as expected, Tymoshenko continues to rebuff Yanukovych's call to step down, she is likely to fall to a vote of no confidence soon. Even then, she will stay on as acting prime minister until a new coalition is forged to produce a successor.
It will not be an easy task for Yanukovych's Party of Regions, which, though the biggest in parliament, will have to work hard to find new partners in parliament to oust the Tymoshenko Bloc.
The main political players, including powerful business figures, today mulled ways of striking a deal on an alliance that may be able to produce a compromise choice for prime minister.
Businessman Serhiy Tihipko was favored as a possible for the role before the February 7 vote because he came a strong third in an earlier first round.
He told the "Sevodnya" newspaper he was ready to serve under Yanukovych as long as he could carry out reforms. But though close to powerful oligarch Ihor Kolomoysky with whom he shared banking interests, Tihipko has no power base in parliament.
Another strong candidate is Mykola Azarov, a former finance minister and Yanukovych's top lieutenant. But oligarch Akhmetov is believed to oppose him for the job.
Former Foreign Minister Arseniy Yatsenyuk, a first-round presidential candidate, has also been mentioned as a compromise candidate. He has wide political experience, but the level of support he would have in parliament is more difficult to assess.