* EU leaders not expected to act on tougher sanctions
* Merkel says decision depends on report from Poroshenko
* EU to urge Russia to stop flow of weapons - draft
By Barbara Lewis and Adrian Croft
BRUSSELS, June 26 European Union leaders will urge Russia on Friday to stop the flow of weapons and militants across its border with Ukraine and will threaten tougher sanctions, according to a draft statement seen by Reuters.
EU officials said it was unlikely however that the leaders would actually give the go-ahead to new sanctions at the summit, when they will be briefed by Ukrainian President Petro Poroshenko.
German Chancellor Angela Merkel said on Thursday that progress in Ukraine after nearly a week of a ceasefire "has not yet been so clear ... as I would have hoped".
"We will talk about how much further we should go on sanctions or how far there is progress in the coming hours. That can only be decided tomorrow in the light of the report by the Ukrainian president," she told reporters.
U.S. Secretary of State John Kerry said on Wednesday Russian President Vladimir Putin's response to Poroshenko's peace plan would decide whether the United States and Europe step up sanctions.
So far, the EU has imposed limited measures, targeting 61 people in Russia and Ukraine with asset freezes and travel bans, as well as two energy companies in the Ukrainian peninsula of Crimea, taken over by Moscow earlier this year.
The EU is divided about going further and imposing tough economic sanctions on Russia, with member states wary of provoking retaliation from the EU's biggest energy supplier.
The 28 EU leaders will throw their weight behind Poroshenko's peace plan and "take note" of the decision by the upper chamber of Russia's parliament to retract a law allowing Russian forces to intervene in Ukraine, the draft statement said.
The summit will voice regret that the ceasefire "while being respected by the Ukrainian authorities, has not led to the full cessation of military hostilities".
"Therefore, it calls upon all parties to genuinely commit to the implementation of the peace plan and to cement the cessation of the military activities," the draft statement said.
More than 420 people, including Ukrainian servicemen, rebels and civilians, are estimated to have been killed in the fighting in Ukraine, the United Nations said this week.
Ukrainian separatists agreed on Thursday to resume peace talks to end the conflict in the east, but Poroshenko warned he might not extend a ceasefire beyond Friday night if their gesture was aimed only at buying time.
The EU leaders will urge Russia to "actively use its influence over the illegally armed groups and to stop the flow of weapons and militants across the border, in order to achieve rapid and tangible results in de-escalation".
It held out the threat of tougher sanctions on Russia, saying EU officials had prepared targeted measures "so that further steps can be taken should events in eastern Ukraine so require". (Additional reporting by Paul Taylor and Tom Koerkemeier; editing by Andrew Roche)