5 Min Read
* EU leaders meet on Thursday for two-day summit
* Russia, Ukraine and energy to top the agenda
* Leaders may add names to Russia travel-ban, asset-freeze list
* No consensus on imposing stricter financial sanctions
By Luke Baker
BRUSSELS, March 20 (Reuters) - As Russian President Vladimir Putin celebrates his seizure of Crimea, European Union leaders hold critical talks on Thursday on how to respond amid growing doubts over whether they are united enough to impose hard-hitting sanctions on Moscow.
The EU's foreign ministers agreed this week to subject 21 Russians and Crimeans to travel bans and asset freezes, but it was a relatively minor response mocked by Russian officials as ineffectual and ultimately meaningless.
EU Leaders will discuss their next move at a dinner in Brussels on Thursday evening, when they will likely agree to add more names to the travel-ban and asset-freeze list, possibly including political and military figures close to Putin.
That would be something, but would still fall far short of the stricter financial, business and trade sanctions many diplomats and analysts believe are necessary to make Putin think twice and put a stop to his creeping involvement in Ukraine.
"To remain credible, we have to deliver on what we promised," one EU ambassador said on Wednesday, referring to a statement on March 6 when the EU said it would consider financial sanctions if there were "any further steps by the Russian Federation to destabilise the situation in Ukraine".
When leaders made that statement two weeks ago, it was still not clear to them whether the Russian-speaking forces in Crimea were sent by Putin and if he had plans to occupy the peninsula.
Since then, Putin has not only seized the region, but a referendum has been held in which Crimeans voted 97 percent in favour of seceding from Ukraine, and Putin has officially incorporated Crimea and its 2 million people into Russia.
Yet rather than seeing those events as sufficient justification to move to the next stage of sanctions, most EU member states appear inclined to hold off for now, keeping stage three - as the financial sanctions are called - for any move by the Russian military into eastern parts of Ukraine.
"There's no appetite, no consensus to move to stage three at this point," said one European official involved in preparing for the summit discussions on Thursday.
Instead, leaders will have a debate about what the trigger for the further phase of sanctions would be, what specific measures might be included in such a step, and how to mitigate against the retaliation Moscow has promised.
"What we're looking at is something in between phase 2 and phase 3," said a French diplomat. "Something that is efficient, makes a point and is understandable to the average European."
The problem Europe faces is maintaining its unity. While Russia or the United States can largely act on the directions of one person, the European Union can only act with the unanimous agreement of 28 prime ministers and presidents.
While Germany, Britain, France, Poland and one or two other countries may be largely in agreement about the need to take tough action against Russia, potentially including financial and trade sanctions, most of the rest have deep reservations.
The message that emerged from a range of briefings by member states on Wednesday was that the time is not yet ripe for stage three sanctions. What that means in practice is that Putin's annexation of Crimea may have to be quietly accepted.
"Even if we never recognise Crimea, I guess Crimea has been digested by Russia. It is very unfortunate what has happened," said a senior diplomat from an east European member state.
"We have to accept the Russian way of thinking is not the same as ours. Their values are different from our values."
While there is not the appetite to move to stricter sanctions yet, officials are taking the long view.
It takes time to identify the right targets for financial and trade sanctions, and the legal net must be woven very precisely. Detailed work will continue on that, even if there is no consensus yet on implementing the measures.
"It's important to ratchet the pressure up gradually, step by step," said a northern European diplomat. "You can't just seize people's bank accounts without evidence."
And it's also critical that EU member states agree a means of sharing the impact of any Russian retaliation, which is likely to fall disproportionately on those with closer trade ties with Moscow and more dependent on its energy exports.
"What is certain," said the French diplomat, "is that relations with Russia will be cold for several years to come, so we have to think about how we deal with that moving forward." (Additional reporting by Adrian Croft, Martin Santa and Robin Emmott in Brussels and Paul Taylor and John Irish in Paris; Writing by Luke Baker; Editing by Giles Elgood)