* EU leaders meet on Thursday to discuss next steps on
* U.S. pushing for sanctions against Moscow, Europe more
* Germany's Merkel urges mediation to resolve Ukraine crisis
* If Russia does not change course, EU sanctions possible
By Luke Baker
BRUSSELS, March 5 (Reuters) - European leaders are under
pressure to match the United States in imposing sanctions on
Russia over Ukraine. But splits in the European Union, with many
countries either close to Russia or reliant on its energy, means
EU-U.S. unity is unlikely.
The EU has given Russian President Vladimir Putin until
Thursday to reverse course over Crimea or face sanctions, which
could include visa and travel bans, the freezing of Russian
assets abroad and other political and economic steps.
At the same time, diplomatic energy is being deployed to try
to get Putin to accept monitoring on the ground in Crimea and
broader mediation with Ukraine, possibly via the Vienna-based
Organization for Security and Cooperation in Europe.
EU leaders will meet in Brussels on Thursday to decide on
the next steps, but diplomats and EU officials say it is
unlikely that there will be agreement among all 28 member states
for any hard or far-reaching measures against Russia.
Under EU rules, unanimity is required to impose sanctions.
"I'm not convinced leaders can go very much further," said
one EU official involved in preparations for the summit.
"If you are arguing for de-escalation, how do you achieve
that if you escalate via sanctions? There's a desire among major
member states to avoid measures that might provoke."
Finnish Prime Minister Jykri Katainen, whose country shares
a 1,300 km (800 mile) border with Russia and understands the
Russian mindset after past wars, said mediation was preferred.
"Any sanctions must be looked at only if the negotiations
won't proceed," he said. "Sanctions always have a negative
impact for the ones that launch them, so they must be carefully
evaluated. It is likely there will be counter-sanctions."
The most influential country in the debate is Germany, which
has vast business and trade ties with Moscow, including
importing nearly a third of its gas from Russia.
Chancellor Angela Merkel has been the most forthright among
EU leaders in advocating mediation, a position backed to varying
degrees by France, Britain, the Netherlands and Italy - five of
the largest and most powerful EU member states.
While Merkel has not ruled out sanctions - and EU foreign
ministers have agreed that in the absence of "de-escalating
steps" by Russia they will consider "targeted measures" - she
would rather rely on dialogue to ease tensions.
The stakes are high. 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 there in Russia.
For its part, Britain was embarrassed on Monday when
photographers took pictures of an official taking documents into
a meeting with Prime Minister David Cameron showing UK
opposition to restrictions on Russian access to London.
Britain said the documents were no guide to the line it
might take on sanctions, but it was an indication of the grey
area that exists in Europe, far different from the
black-and-white approach in Washington.
With Russia supplying nearly a third of Europe's oil and
gas, Moscow holds a degree of leverage it could never hope to
exert on the United States, which is largely energy independent.
Add to that the close historical or business ties that exist
between Moscow and countries such as Cyprus, Italy, Bulgaria and
Hungary, and it quickly becomes clear that securing EU unanimity
on sanctions may be impossible.
Even the decision by the G7 nations to suspend preparations
for the G8 summit in Sochi in June - a move to isolate hosts
Russia - was not uniformly backed in private: diplomats said
Italy had reservations about it.
Putin knows the pressure he can bring to bear on Europe, and
yet is also aware that Europe is far and away Russia's largest
trading partner and the biggest buyer of its energy.
While Moscow has threatened retaliation against the United
States and Europe if they impose sanctions, Putin has also been
quick to talk down the threat of an economic escalation.
"It's not necessary to add to the difficult situation," he
said on Wednesday. "It is not necessary to whip things up and
place political considerations on top of issues of economic
Another factor playing on the minds of EU officials is what
to do if sanctions are imposed. The quality of sanctions depends
on the precision with which the legal net is drafted. In the
case of EU sanctions on Iran, that net was steadily unpicked.
U.S. officials have indicated they are considering sanctions
on Russia banks, in much the same way measures were imposed on
Iranian banks over the country's nuclear programme.
The EU's history there is unpalatable: it followed the U.S.
and imposed sanctions on a number of Iranian banks. But some of
the banks sued in the European courts and won because the EU
could not produce sufficient evidence.
It is an experience the EU would prefer not to repeat.
(Additional reporting by Justyna Pawlak in Brussels and Jussi
Rosendahl in Helsinki; Writing by Luke Baker; Editing by Giles
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