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UPDATE 1-Ukraine ruling party set for election win, nationalists gain

* Initial results put Yanukovich party in lead

* Regions party leaders foresee parliament majority

* Nationalists, Klitschko party revitalise opposition

KIEV, Oct 29 (Reuters) - Ukrainian President Viktor Yanukovich's party was on course on Monday to secure a parliamentary majority after an election, but will face an opposition boosted by resurgent nationalists and a liberal party led by boxing champion Vitaly Klitschko.

Victory for the ruling Party of the Regions in Sunday's vote will cement the leadership of Yanukovich, who faces re-election in 2015 and whose rule has been marked by an accumulation of presidential powers and antagonism with the West over the imprisonment of his rival, opposition leader Yulia Tymoshenko.

``It is clear the Party of the Regions has won ... These elections signal confidence in the President's policies,'' Prime Minister Mykola Azarov told reporters.

Partial results put the Regions in the lead, with 36.8 percent of the votes in the part of balloting conducted by party lists.

A senior Regions official said he expected the party to secure two thirds of the remaining vote in individual districts, ensuring it of a simple majority in the former Soviet republic's 450-seat assembly. It has ruled until now as a coalition.

The biggest surprise came from the Ukrainian nationalist Svoboda (Freedom) party which, according to partial results took about 7.5 percent of the party list voting, assuring it of winning more than one seat in parliament for the first time.

The partial results published by the central election commission were based on 28 percent of ballots, and the Regions' margin over the opposition was narrowing as counting continued. Exit polls had given the Regions about 30 percent, with Svoboda on about 12 percent.

The strong showing by Svoboda - which is based in the Ukrainian-speaking west and occupies the opposite end of the political spectrum to the Regions - boosted opposition ranks that have been weakened by the jailing of Tymoshenko.

The other new wild card in parliament will be held by Klitschko's UDAR (Punch) party which was in third place behind the Regions and the united opposition which includes Tymoshenko's Batkivschyna (Fatherland), the exit polls showed.

Many voters made clear they were frustrated with the performance of the established political parties in the past few years. Corruption is a big concern in Ukraine and many Ukrainians face economic hardship.

``We have seen some parties in power and others as well,'' said Tetyana, 27, referring to Batkivshchyna and the Regions. ``We have seen the results.''

Even in Donetsk, Yanukovich's main stronghold in the east of the country, many voters said they were disillusioned by the government's record.

``I voted for the Regions Party but simply because it is the lesser of the evils. I can't say I am a great fan of the Regions, but all the rest are worse,'' said 58-year-old Viktor Grigoryev, a head of section in the construction sector.

OBSERVERS' VERDICT

Tymoshenko, the country's most vibrant opposition figure, was jailed for seven years last year for abuse of office relating to 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 country of 46 million, a major exporter of steel and grain, is more isolated politically on the international stage than it has been for years.

Apart from being at odds with the United States and the European Union over Tymoshenko, Ukraine does not see eye to eye with Russia, which has turned a deaf ear to Kiev's calls for cheaper gas.

At home, the government is also blamed for failing to stamp out corruption and has backed off from carrying out painful reforms that could secure much-needed IMF lending to shore up its export-driven economy.

Though these three opposition parties appeared to have won roughly half of the vote on party lists, they were not expected to fare as well in the single-mandate constituencies.

Borys Kolesnikov, a deputy prime minister, said he foresaw the Regions picking up two thirds of these individual districts.

With the West seeing the poll as a test of Ukraine's commitment to democracy after Tymoshenko's imprisonment, interest will focus on the judgment by observers from the OSCE European security and human rights body later on Monday.

Arseny Yatsenyuk, head of the united opposition in the absence of Tymoshenko, said: ``The exit poll results have shown that the people of Ukraine support the opposition and not the government.''

If the exit polls prove accurate, Klitschko, the WBC heavyweight boxing champion, will now enter parliament at the head of his new party after a campaign in which he has been critical of corruption and cronyism under Yanukovich's rule.

He says his party will team up with Yatsenyuk and other members of the opposition, including Svoboda, though his refusal to join a pre-election coalition engendered suspicion.

``We do not foresee any joint work with the Party of the Regions and its communist satellite. We are ready to work with those political parties which propose a European path of development,'' Klitschko told journalists.

But it was the showing of Svoboda, which pursues a strong Ukrainian nationalist agenda and opposes attempts by the Regions to promote the Russian language over Ukrainian, which caught attention on the night.

Svoboda leader Oleh Tyahnybok, a 43-year-old surgeon, pledged to stick by a pre-election agreement and work with Yatsenyuk and other opposition leaders in the new parliament.

He appealed to Klitschko to formally join the united opposition. ``We can only hope that, having looked at the situation which has emerged, Vitaly Klitschko will unite with us,'' he said in televised comments.

``Svoboda is the biggest sensation,'' said political analyst Volodymyr Fesenko of the Penta think tank. ``The Ukrainian political borsch (soup) has got a bit more spicy. There will be more pepper but how it is going to taste is another question.

Fesenko said that he saw the vote for Svoboda as reflecting a protest against the political establishment.