Viktor Yanukovych (search) announced his resignation as prime minister on Friday, handing Ukraine's pro-Western opposition a symbolic victory, but he vowed to continue his court battle for the presidency of this ex-Soviet republic.

Meanwhile, Viktor Yushchenko (search), the winner of last week's repeat presidential election, and Georgian President Mikhail Saakashvili (search) welcomed the New Year side by side on Kiev's Independence Square, the epicenter of mass protests that overturned the political order in this nation of 48 million.

The joint appearance of two politicians who have openly and actively courted the West was certain to further irk the Kremlin, which had strongly supported Yanukovych.

Yushchenko soundly won the court-ordered presidential revote on Sunday, but Yanukovych has refused to recognize the results and said he would challenge them in the Supreme Court. Under Ukrainian law, Yushchenko cannot be declared president until all appeals are exhausted.

Yanukovych's resignation during a New Year's Eve address to the nation was his first significant concession since the election.

"We are still fighting, but I don't have much hope," Yanukovych said. "I will act as an independent politician, as the rightful winner of the legitimate Nov. 21 election."

Yanukovych claimed victory in that runoff vote, but hundreds of thousands of Ukrainians flooded Kiev's streets to protest massive fraud. After weeks of protests dubbed the "Orange Revolution" because of Yushchenko's campaign color, the court ruled that the election was corrupted, annulled Yanukovych's victory and ordered Sunday's revote.

Outgoing President Leonid Kuchma didn't mention Yanukovych's resignation in his televised New Year's address but said "in 2005, there will be a new president. Every region and every citizen of Ukraine must accept this democratic choice as their own because this person will need your support."

Yanukovych has seen much of his support fall away since, losing the backing of Kuchma and watching as many of his top advisers desert him. Parliament passed a vote of no-confidence in his government on Dec. 1, but he ignored it, calling it illegal.

When Yanukovych returned this week after taking a leave for campaigning, the opposition blockaded his government headquarters, refusing to let him convene a Cabinet session. The meeting went ahead in another building without him.

"I believe it is impossible to have any position in a state that is ruled by such officials," he said, in an apparent reference to Kuchma. "This is my personal position."

The resignation would immediately trigger the dissolution of the entire 20-member Cabinet. According to the constitution, Kuchma must formally accept Yanukovych's resignation and appoint a new government within 60 days -- though he is likely to appoint a caretaker until a new president is inaugurated.

Yuriy Kliuchkovskiy, a lawmaker and Yushchenko's ally, called Yanukovych's decision an acknowledgment that his position is "hopeless."

"There is his pride. He didn't want to submit his resignation documents to newly elected President Yushchenko, he decided to submit them to President Kuchma," he said.

Saakashvili, who was catapulted to power last year in a bloodless revolution that inspired the Ukrainian opposition, made his first stop in Kiev at the opposition's tent camp on Kiev's tree-lined main street. He has displayed his support for Yushchenko by regularly wearing an orange tie.

"I couldn't support you as an official during your revolution, but I was with you and I feel myself again a resident of Kiev," Saakashvili, who studied international law in the Ukrainian capital, told the crowd in Ukrainian.

Saakashvili later joined Yushchenko on Independence Square, telling tens of thousands that "on this square, the future of Europe is being resolved."

The bitterly fought presidential race in Ukraine increased tensions between the West and Russia. Russian President Vladimir Putin rushed to congratulate Yanukovych after his Nov. 21 victory and has accused foreign states of meddling in Ukrainian affairs.

Some Russian politicians have accused the United States of being behind the U.S.-educated Saakashvili's rise to power in Georgia, another former Soviet republic, and of bankrolling the Ukrainian opposition.

The Kremlin has seen its relationship with Tbilisi worsen under Saakashvili, as he has moved to boost Georgia's ties with the European Union and the United States to offset the influence of its giant neighbor.

Yushchenko has pledged to nudge Ukraine closer to the West, making it a priority to pursue a future membership in the European Union. He also has left open the possibility of joining NATO at some point.

Yushchenko, wearing an orange scarf, congratulated his crowd of supporters, telling them, "We weren't free. Today we are independent. Today we are free."