* Russia: we can deploy sanctions but prefer not to
* Britain’s Brown demands review of EU-Russia ties
* Germany says Russia should not be isolated
* U.S. diplomat urges EU to support Georgia
* Georgia seeks “smart” sanctions, monitors and aid
By Christian Lowe
MOSCOW, Aug 31 (Reuters) - Russia does not want confrontation with the West but will hit back if attacked, Kremlin leader Dmitry Medvedev said on Sunday, a day before EU leaders meet to draft a response to Moscow’s actions in Georgia.
British Prime Minister Gordon Brown said he would press fellow European Union leaders to review ties with Russia in retaliation for Moscow’s decision to send troops to Georgia and recognise two Georgian breakaway regions.
But underlining the differences in approach inside the 27-member EU, German Foreign Minister Frank-Walter Steinmeier took a softer line, saying isolating Russia would harm the interests of the bloc.
A senior U.S. diplomat said Washington hoped the EU would express concrete support for Georgia’s territorial integrity, and urged Europe to reduce its dependence on Russian energy.
Medvedev faces growing condemnation from the West, which accuses Russia of occupying parts of Georgia, while the Kremlin said it acted to prevent what it called genocide against the separatist regions.
“Russia does not want confrontation with any country. Russia does not plan to isolate itself,” Medvedev said in an interview with Russia’s three main television stations.
But he added: “Everyone should understand that if someone launches an aggressive sortie, he will receive a response.” He said Russian law allowed the Kremlin to impose sanctions on other states, though it preferred not to go down that path.
Georgia urged the European Union to impose sanctions against those doing business with the two separatist regions, authorise a civilian mission to monitor buffer zones around them and give Tbilisi about $2 billion to help to help repair damage.
“Europe can do a lot, starting with sending a mission of civilian monitors, which would lead to an international peacekeeping mechanism that would replace the presence of Russian troops,” Prime Minister Lado Gurgenidze told Reuters in Brussels.
British Prime Minister Gordon Brown said Russia’s intervention in Georgia was dangerous and unacceptable.
“In the light of Russian actions, the EU should review -- root and branch -- our relationship with Russia,” Brown wrote in a comment published in Britain’s Observer newspaper.
The German foreign minister said Moscow deserved criticism but Europe needed cooperation with Russia.
“Europe would only be hurting itself if we were to get full of emotion and slam all the doors shut to the rooms that we will want to enter afterwards,” Steinmeier said.
Russia supplies more than a quarter of Europe’s gas needs. Some observers say this makes tough EU sanctions unlikely.
Thousands of Georgians are expected to join a “human chain” in Tbilisi on Monday, with people joining hands through the capital in a show of unity.
Georgian President Mikheil Saakashvili, in an address to the nation, said he hoped the EU leaders would not “give up faced with this dirty attempt at aggression”.
TEST OF UNITY
The emergency summit is a test of unity for the EU, which struggles to reconcile differences between states which want punitive action and others, including European heavyweights France and Germany, which favour a more calibrated approach.
It is likely to produce a “stern words-soft action” response from the EU, said Chris Weafer, Chief Strategist with Russia’s Uralsib investment bank.
The bloc is likely to “stop well short of any action that might escalate into a damaging tit-for-tat sequence of economic and political sanctions,” Weafer wrote in a research note.
Russia sent in its troops after Georgia’s military tried to retake South Ossetia, like Abkhazia a Moscow-backed region which rejects Tbilisi’s rule.
Moscow has pulled out most of its forces in line with a ceasefire deal but has kept soldiers and equipment in “security zones,” which include undisputed Georgian territory around South Ossetia and Abkhazia.
Western governments have demanded that Moscow pull its troops back to pre-conflict positions. The Kremlin says the troops are peacekeepers needed to protect the separatist regions from new Georgian aggression.
In a last-minute round of diplomacy before Monday’s emergency EU summit, both Medvedev and U.S. President George W. Bush spoke to Italian Prime Minister Silvio Berlusconi, who is seen as sympathetic to the Kremlin.
U.S. Assistant Secretary of State Matthew Bryza said it was up to the EU to decide what measures it adopts against Russia, but the bloc should throw its weight behind Georgia and make itself less dependent on Russian energy.
“What happened in Georgia shows even more why it is crucial that Europe begins to move more quickly to diversify its supply of gas,” Bryza told Reuters on the sidelines of an international energy conference in Bled, Slovenia. (Reporting by Giles Elgood in London, Thomas Grove in Istanbul, Erik Kirschbaum in Berlin, Guy Faulconbridge and Conor Sweeney in Moscow, Marja Novak and Zoran Radosvljevic in Bled, Slovenia, Jeremy Pelofsky in Washington and Mark John and Marcin Grajewski in Brussels; editing by Philippa Fletcher)