KIEV - Ukrainian opposition leader Viktor Yanukovich pressed rival Yulia Tymoshenko to concede defeat on Monday after a narrow victory in a presidential election that could tilt the ex-Soviet state back towards Moscow.

With 98.4 percent of votes counted, official figures gave ex-mechanic Yanukovich, whose party is allied to the Kremlin's United Russia, a margin of 2.8 percentage points over firebrand Prime Minister Tymoshenko, meaning she could not overtake him.

Tymoshenko, who called supporters onto the streets in 2004 to overturn a previous Yanukovich election win that was ruled fraudulent, was uncharacteristically quiet on Monday, postponing a planned news conference until the following day.

Her supporters alleged numerous violations of electoral law in Sunday's runoff vote but election officials and monitors said they had not seen serious faults.

International observers headed by the Organisation for Security and Cooperation in Europe (OSCE) endorsed the poll as an impressive display of democracy and called on Ukraine's feuding political leaders to listen to the people's verdict.

The OSCE verdict was almost tantamount to a call by the international community for Tymoshenko to accept the fight was over.

Central Election Commission officials said the votes still left to be counted were likely to increase Yanukovich's victory margin slightly -- but the victorious candidate still faced a daunting array of hurdles.

Western investors and Ukraine's powerful neighbour Russia reacted cautiously to the election outcome, aware that a prolonged period of uncertainty over the result could hurt the country's sickly economy even more.

The hryvnia currency traded little changed from last week at 8.06/8.08 to the dollar by 11:15 a.m. British Time. while prices for insuring Ukrainian debt against default were steady. Investors rate Ukrainian debt as among the world's riskiest after the economy contracted around 15 percent last year.
Andrew Wilson, a senior policy fellow at the European Council on Foreign Relations, said Yanukovich's small lead could be contested. The temptation will be there for (Tymoshenko) to make a challenge, he added.

Just under 600,000 votes separated the two sides, reflecting Ukraine's deep divisions between its Russian-leaning east and south and the Western-friendly central and western regions.

More than a million voters chose to vote against both candidates, an option offered on the ballot paper.

Tymoshenko's camp, alleging fraud, offered a parallel vote count that claimed she was edging out her rival.

EUPHORIA TO DISILLUSION

The official results signalled a comeback for the rough-hewn Yanukovich, 59, and widespread disillusionment among Ukrainians that the Orange Revolution democracy movement of 2004 has not delivered the hoped-for prosperity and stability.

Reversing current President Viktor Yushchenko's pro-Western, anti-Moscow course, Yanukovich has promised to give the Russian language official status alongside Ukrainian.

He called for a historic partnership with Moscow in a speech to the Kremlin's ruling party congress in November last year and has backed Kremlin chief Dmitry Medvedev's proposals for a new security architecture in Europe to replace NATO.

Yanukovich urged his 49-year-old rival on Sunday night to resign as prime minister.
Aide Borys Kolesnikov, answering reporters' question on Monday, said there were no back-stage contacts with Tymoshenko's camp to do a deal on a future alliance.

It is impossible. There can be no coalition with BYuT (the Tymoshenko bloc in parliament), said Kolesnikov.

Tymoshenko was the co-architect of the 2004 revolution with Yushchenko, but their relationship quickly soured and Yushchenko has attacked her bitterly in this year's campaign.

The fiery former gas tycoon urged her team late on Sunday to fight for every result, every document, every vote, though she backed away from a threat to call people out on to the streets in a repeat of the 2004 protests.

In Russia, the source of the gas which flows through Ukraine's pipeline network to the West, the election was closely watched but state-controlled media avoided taking sides.

The country's two leaders, Medvedev and Prime Minister Vladimir Putin, did not make any public statements on the vote and their spokesmen declined comment.

Ukraine's $120 billion (77 billion pounds) economy has been battered by a decline in the value of vital steel and chemicals exports that has hammered the hryvnia currency, slashed budget revenues and undermined the domestic banking system.

Russia Dmitry Medvedev Ukraine