EU weighs Russia sanctions as Ukraine diplomacy falters

BRUSSELS-

European Union leaders were set to warn but not sanction Russia on Thursday over its military intervention in Ukraine after Moscow rebuffed Western diplomatic efforts to persuade it to pull forces in Crimea back to their bases.

Russian Foreign Minister Sergei Lavrov refused to meet his new Ukrainian counterpart or to launch a “contact group” to seek a solution to the crisis at talks in Paris on Wednesday despite arm-twisting by U.S. Secretary of State John Kerry and European colleagues. The two men will meet again in Rome on Thursday.

Tension remained high in Ukraine’s southern Crimea region, where a senior United Nations envoy was surrounded by a pro-Russian crowd, threatened and forced to get back on his plane and leave the country.

An emergency EU summit in Brussels is unlikely to adopt more than symbolic measures against Russia, Europe’s biggest gas supplier, because neither industrial powerhouse Germany nor financial center Britain is keen to start down that road.

The United States has said it is ready to impose sanctions such as visa bans, asset freezes on individual Russian officials and restrictions on business ties within days rather than weeks.

Russia’s ruble currency weakened further on Thursday despite central bank intervention due to what analysts at VTB Capital called the political risk premium.

The short, informal EU summit will mostly be dedicated to displaying support for Ukraine’s new pro-Western government, represented at the Brussels talks by Prime Minister Arseny Yatseniuk, who will attend the lunch although Kiev is neither an EU member nor a recognized candidate for membership.

After meeting European Parliament President Martin Schulz, Yatseniuk appealed to Russia to respond to mediation efforts to end the crisis.

The European Commission announced an aid package of up to 11 billion euros ($15 billion) for Ukraine over the next couple of years provided it reaches a deal with the International Monetary Fund, entailing painful reforms like ending gas subsidies.

Diplomats said that at most, the 28-nation EU would condemn Russia’s so far bloodless seizure of Ukraine’s Black Sea province and suspend talks with Moscow on visa liberalization and economic cooperation, while threatening further measures if President Vladimir Putin does not accept mediation efforts soon.

But they will hold back from further reaching steps both in hopes of a diplomatic breakthrough to ease tensions in Ukraine and out of fear of a tit-for-tat trade war with Russia, a major economic partner of Europe.

France has a deal to sell warships to Russia that it is so far not prepared to cancel, London’s banks have profited from facilitating Russian investment, and German companies have $22 billion invested in Russia.

Before the summit, European members of the Group of Eight major economies will meet separately, diplomats said, in an apparent effort to coordinate positions towards Russia, due to host the next G8 summit in Olympic venue Sochi in June. They have so far stopped participating in preparatory meetings and Canada has said G7 countries may meet soon without Russia.