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By Richard Balmforth
KIEV (Reuters) - He might be ready to let her out. But he can't afford to let her back.
As deadlines near on the future of Ukraine's ties with Europe, President Viktor Yanukovich is under pressure to put aside personal animosity and let his jailed opponent, Yulia Tymoshenko, go to Germany for medical treatment.
Softening Yanukovich's hardline stance on his arch-rival is seen as crucial if Ukraine is to secure the signing of landmark agreements, including a free trade deal, with the European Union at a November summit.
But, diplomats say, the 63-year-old former truck driver knows that allowing her to rejoin the political fray would endanger his run at a second term in 2015, given her formidable populist appeal and her organizational skills.
"The proposal is for Tymoshenko to go for treatment in Germany on condition that she does not take part in Ukraine's political life," wrote Dmitry Korotkov in Segodnya newspaper.
Others were more blunt. "He wants her politically dead," one diplomat told Reuters.
The bile between Yanukovich and the sharp-tongued Tymoshenko has poisoned Ukrainian politics for years. The former prime minister emerged as his nemesis in the 2004 "Orange Revolution" when she used her powerful skills as an orator to lead street protests against vote-rigging, dooming his first bid for power.
Her defeat by Yanukovich in a bitterly-fought run-off vote in February 2010, in which she heaped insults on him, led her to a prison cell, say her supporters.
Since late 2011 she has been serving a seven-year jail term after being convicted of abuse-of-office, most of it under guard in a hospital where she is being treated for back trouble.
She denies any wrongdoing and says her prosecution is political revenge - a view shared by the European Union which has denounced "selective justice" in the former Soviet republic.
From her hospital room, she continues to berate Yanukovich, accusing him of plundering the country's resources to enrich himself, his family and his coterie of favorites.
At a March news conference Yanukovich declined to give a direct answer about his wealth or that of his elder son Olexander, a wealthy businessman, but routinely dismisses such charges as politically motivated.
Her critics lay similar charges at her door, pointing to the personal fortune she amassed in the 1990s as a businesswoman operating in a murky gas industry - activity which earned her the nickname of 'the gas princess'.
For some months now, EU heavyweight Germany has been formulating a plan to provide Yanukovich with a way out - quietly pushing a "humanitarian" solution in which Tymoshenko could be received for medical treatment in a Berlin hospital.
This formula - so the logic goes - would allow Yanukovich to show himself in a good light and might ensure signing of planned agreements on political association and free trade with the European Union at the Vilnius, Lithuania, summit.
"In his intensive exchanges with counterparts in the Ukrainian government, Foreign Minister (Guido) Westerwelle has reiterated the government's offer of medical treatment for Yulia Tymoshenko in Germany," the German foreign ministry said in Berlin.
Envoys from the European Parliament who also last April helped secure the release of a Tymoshenko ally, visited Ukraine again last week, pushing "the German option" as a way of breaking the deadlock over Tymoshenko.
But it is still unclear which way Yanukovich will jump and his administration continues to pile up charges against her.
His fears she could re-emerge as a political threat to him no matter what the conditions attached to a humanitarian pardon, have led to tortuous negotiations, an EU insider said.
According to this source, the Yanukovich camp is insisting as part of any deal that she must pay back more than 1.5 billion hryvnia (about $188 million) in estimated damages to the Ukrainian economy caused by her alleged reckless conduct as prime minister.
"The thinking is that that would prevent her financing any campaign against him," the source said.
Brushing off EU charges of "selective justice", his aides repeat the mantra that the rule of law has to be respected.
Yet an end to the impasse promises Yanukovich rich rewards.
The free-trade agreement potentially on offer from the European Union would open up a huge market for Ukrainian exports - steel, grain, chemicals and food products - and provide a powerful spur for much-needed foreign investment.
That would be a boon for a country traditionally reliant on trade with Russia and guarantee Yanukovich a place in the history books, something aides say he still aspires to.
An EU deal is also in the interests of influential power brokers in Ukraine such as steel billionaire Rinat Akhmetov and others, and Yanukovich has consistently set European integration as a foreign policy priority.
Nevertheless, only a change of power in 2015 and the end of the Yanukovich leadership is likely to secure early release for the ambitious Tymoshenko.
She is under family pressure to protect her health but knows departure might end her political career in politics.
For despite low ratings due to popular anger over low wages, high prices, poor social services and endemic corruption, Yanukovich looks well placed for re-election in 2015 - as long as she remains out of the running.
Opposition figures such as world heavyweight boxing champion Vitaly Klitschko and former economy minister Arseny Yatseniuk have failed to agree a single candidate to challenge him.
Though opinion polls now show him well behind in any straight fight with Klitschko, most commentators believe he will be able to marshal the resources of wealthy entrepreneurs and a tamed press to ensure a second term.
So as time for a deal runs out - the mediation mandate of two European parliament envoys expires at the end of September - Yanukovich has yet to signal he is ready to compromise.
"The cost of letting her go is too much to President Yanukovich personally," said Olga Shumylo-Tapiola, visiting scholar of Carnegie Europe in Brussels.
"If Tymoshenko gets out somehow, this would be a real threat for Yanukovich. Even if she could not run in the election, she has very strong organizational powers. She is still considered a very dangerous person for the authorities," she said.
(Additional reporting by Sarah Marsh in Berlin; Writing By Richard Balmforth; Editing by Jon Boyle)