EU prestige on the line over Georgia crisis

BRUSSELS (Reuters) - European Union leaders meeting for crisis talks over the Georgia conflict next week will aim to pile pressure on Russia for a full troop withdrawal, but internal divisions could weaken their hand.

France's Nicolas Sarkozy thrust the bloc into the forefront of diplomacy this month to stop the war over South Ossetia, brokering the peace accord that helped end hostilities claiming hundreds of lives and leaving thousands homeless.

But the EU has since appeared embarrassingly flat-footed by Moscow's moves to leave troops in strategic areas of Georgia, defying Western complaints that it was in breach of the accord.

"The time has come. By making itself the broker of the peace deal, the EU has the responsibility to ensure it is followed through. Otherwise it could lose face," said Andrew Wilson of the European Council on Foreign Relations (ECFR) think-tank.

"But there are still big divisions and they are not going to go away," he added of a longstanding split within the 27-nation bloc between those want a tougher line on Russia and others who strive to see eye-to-eye with Moscow.

While Sarkozy and German Chancellor Angela Merkel are seen exasperated by Russia, they and other western European leaders have yet to fully echo the condemnations of Russia heard through the Baltics, Sweden and eastern states such as Poland.

"We're not talking about sanctions," French Foreign Minister Bernard Kouchner told French radio on Monday, when asked what could emerge from the one-day summit in Brussels. "We'll have to see. We have to take stock of the situation."

In theory, EU action could run from sending in peacekeepers to diplomatic moves such as breaking off talks with Russia over a wide-ranging strategic partnership, or even economic sanctions such as curbing existing trade arrangements.

But a reluctance among many nations at becoming embroiled in an obscure Caucasian trouble-spot, and an awareness of Russia's clout as Europe's top energy supplier have prevented action.

WHO WOULD HURT MOST?

EU foreign ministers meeting two weeks ago agreed in principle to send monitors to supervise the ceasefire but stressed that any robust peacekeeping role would need a mandate from the U.N. Security Council, where Russia has a veto.

"An ESDP (European Security and Defence Policy) mission is one option -- but the question is what form? At the moment, it seems it would be more about monitoring than peacekeeping," said a EU source, using the EU term for a joint EU security operation.

Economic measures are equally tricky.

Any move by the EU side to freeze negotiations on a new partnership and cooperation agreement (PCA) with Russia -- a second round of which is due next month -- would raise questions about which side would be hit harder.

"Russia seeks only a vague document, while the EU wants a legally binding treaty that includes trade and energy," the International Crisis Group (ICG) noted in a report last week about an accord about which the EU has shown most enthusiasm.

Heavy sell-offs of Russian stocks during the crisis may have bolstered EU officials in their argument that Moscow needs Europe's markets, investors and backing for integration into bodies such as the World Trade Organization (WTO).

But Prime Minister Vladimir Putin indicated on Monday that Russia was in no mood to be swayed by threats of economic measures, with Interfax quoting him as saying that Moscow did not see any advantages from WTO accession in any case.

In the near-term, EU leaders have a number of smaller levers with which to apply pressure, analysts say.

Chief of these could be any move to curtail talks on visa liberalization, ECFR's Wilson said. "The Russian elite is very keen on that (reform)," he noted of a measure which would hit the travel freedom of top officials and business executives.

Another would be a "cautionary shot across the bows" raising concerns about Russia's plans to host the 2014 Winter Olympic Games in Sochi, just 40 km (25 miles) from the Georgian border, the International Crisis Group argued.

"A threat to the success of those Games would be taken seriously by the Russians," it said, arguing the Games were a "major source of pride and prestige for the Kremlin".

(Additional reporting in Paris by James Mackenzie; Editing by Giles Elgood)