By Richard Balmforth and Olzhas Auyezov
KIEV (Reuters) - Ukrainian President Victor Yanukovich's party was on course on Monday to secure a parliamentary majority but international monitors said flaws in the way the election was conducted meant the country had taken a "step backwards".
Exit polls and first results from Sunday's vote showed Yanukovich's Party of the Regions would, with help from long-time allies, win more than half the seats in the 450-member assembly after boosting public sector wages and welfare handouts to win over disillusioned voters in its traditional power bases.
They will face, though, a revitalized opposition boosted by resurgent nationalists and a liberal party led by boxing champion Vitaly Klitschko.
But a team from the Organisation for Security and Cooperation in Europe, which sent more than 600 observers to monitor the election, criticized the way it had been conducted.
"The elections were characterized by the lack of a level playing field caused primarily by the abuse of administrative resources, lack of transparency of campaign and party financing and lack of balanced media coverage," the OSCE mission said in a statement.
"Certain aspects of the pre-election period constituted a step backwards compared with recent national elections," it said, a reference to Yanukovich's election in February 2010 which was judged fair by the West.
It said the inability of jailed opposition leader Yulia Tymoshenko to run as a candidate had also "negatively affected" the election process.
Prime Minister Mykola Azarov, who said on Sunday night that the Regions' apparent victory showed confidence in Yanukovich's policies, brushed off criticism of the poll. He told a separate Russian-led observer mission that criticizing the vote would "be like calling white black".
Victory for the pro-business Regions party, which represents the interests of the wealthy industrialists bankrolling it, will underpin the leadership of the president, who comes up for re-election in the former Soviet republic in 2015.
His rule since taking power has been marked by an accumulation of presidential powers and tension with the West over the imprisonment of Tymoshenko, a former prime minister.
Balloting is in two parts, with half the seats allotted to individual candidates winning local district polls and half to parties according to their share of the vote nationally.
Partial results from the Central Election Commission showed the Regions winning 118 constituencies; that, with its projected national vote, would give the party 205 seats. With support from allies such as the communists and independents, the Regions appear certain to reach the 226 seats needed to form a majority.
The main, united opposition bloc, which includes Tymoshenko's Batkivshchyna (Fatherland), was in second place on the party list vote and leading in 36 individual districts.
The Regions appeared to have fared well despite the government's unpopularity and the authoritarian image of Yanukovich, which does not sell well across the country.
Its success was due in part to increased state handouts and promises to enhance the status of the Russian language - an important pledge for Russian-speaking voters in the president's eastern power base, who fear being at a disadvantage to native speakers of Ukrainian.
The introduction of constituency voting also favored Regions candidates, who could draw on state resources.
The biggest surprise came from the nationalist Svoboda (Freedom) party which, according to partial results, won almost 9 percent in the party-list voting. This means it will have significant representation in parliament for the first time.
The unexpectedly strong showing by Svoboda - which is based in the Ukrainian-speaking west, pursues a strongly Ukrainian nationalist agenda and opposes attempts by the Regions to promote the use of Russian language - bolstered the ranks of an opposition which has been weakened by the jailing of Tymoshenko.
The other new opposition wild card in parliament will be held by UDAR. Led by boxer Klitschko, under an acronym meaning "punch", the party was in fourth place behind the Regions, communists and the opposition bloc that includes Batkivshchyna.
Many voters made clear they were frustrated with the performance of the established political parties over the past few years. Corruption is a big concern in Ukraine and many of the 46 million Ukrainians face economic hardship.
AT ODDS WITH WEST
Tymoshenko was jailed for seven years last year for abuse of office over a 2009 gas deal with Russia which she made when she was prime minister. The Yanukovich government says the agreement saddled Ukraine with an enormous price for gas supplies.
The second most populous of the former Soviet states, a major exporter of steel and grain sandwiched between Russia and the European Union, Ukraine is more isolated politically on the international stage than it has been for years.
It is at odds with the United States and EU over Tymoshenko, and does not see eye to eye with Moscow, which has turned a deaf ear to Kiev's calls for cheaper gas.
In Ukraine, the government is also blamed for not stamping out corruption and has backed off from painful reforms that could secure much-needed lending from the International Monetary Fund (IMF) to shore up the economy.
Klitschko, the two-meter (6-foot-7)-tall WBC heavyweight champion, will now enter parliament at the head of his new party and could be a towering force in the assembly. He has been critical of corruption and cronyism under Yanukovich.
He says his party will team up with Arseny Yatsenyuk, who leads the united opposition in Tymoshenko's absence, as well as with other opposition groups, including Svoboda - though his refusal to join a pre-election coalition engendered suspicion.
He ruled out any pact with the Regions. "We do not foresee any joint work with the Party of the Regions and its communist satellite," he said. "We are ready to work with those political parties which propose a European path of development."
Svoboda chief Oleh Tyahnybok, a 43-year-old surgeon, promised to stick by a pre-election agreement and work with Yatsenyuk and other opposition leaders in parliament. He also pressed Klitschko to join the united opposition formally.
(Additional reporting by Pavel Polityuk; editing by David Stamp)