A woman stands in front of a banner displaying the stars of the European Union flag before a ceremony to mark the start of the European Union?s Lisbon reform treaty in Lisbon December 1, 2009.
A woman stands in front of a banner displaying the stars of the European Union flag REUTERS/ Nacho Doce

PARIS/LUXEMBOURG (Reuters) - Russia's tactics of fostering instability in Ukraine without further overt military intervention are sharpening divisions in the European Union over whether to impose economic sanctions, making an early decision to get tough very unlikely.

EU foreign ministers decided on Monday to expand their list of 33 individuals targeted with asset freezes and visa bans for their roles in Moscow's seizure and annexation of Crimea from Ukraine in February.

But that agreement masked deeper differences over what would trigger a third phase of sanctions against Moscow, moving from largely symbolic diplomatic measures and personal restrictions to broader curbs on trade, energy and finance with Russia.

Despite a statement by French Foreign Minister Laurent Fabius that EU leaders could meet as early as next week to adopt new sanctions, diplomats said there was little prospect of such a special summit because positions were so far apart.

"If Russia doesn't cross the red line of direct military intervention, then I don't expect the EU to cross the red line of economic sanctions," said Stefan Lehne, a former senior EU official on eastern Europe who is now a visiting scholar at the Carnegie Endowment for International Peace.

Instead, Moscow appears to be using the seizure of public buildings by armed, masked pro-Russianmilitiamen in towns and cities in eastern Ukraine and steep increases in the gas price to raise pressure on Kiev and undermine a planned May 25 presidential election.

Lehne said Russian President Vladimir Putin seemed intent on delegitimizing the Kiev government by promoting a "failed state" in the east while avoiding a blatant military presence. At best that might be a prelude to a negotiation on a federal or highly decentralized Ukraine that might be acceptable to all sides.

As so often in the 28-nation EU, the position of Germany, the bloc's biggest economic power, which has a historic special relationship with Moscow, will be crucial, but Berlin is holding back from decisive action.

With Chancellor Angela Merkel on Easter vacation and Foreign Minister Frank-Walter Steinmeiertravelling in East Asia, the Germans kept a low profile at Monday's EU meeting in Luxembourg.

Three Camps

Vice-Chancellor Sigmar Gabriel, also economy and energy minister, called on Tuesday for Moscow to show it was serious about defusing the crisis at four-power talks in Geneva on Thursday, the first to bring the Russian and Ukrainian foreign ministers to the table with the United States and the EU.

"We expect that Russia will take serious and publicly visible steps in these talks towards de-escalation. It's in Russia's hands to prevent a further escalation that would lead to economic sanctions," Gabriel told reporters in Berlin.

Diplomats said the Europeans wanted to strengthen the Western hand in Geneva, where the EU will be represented by foreign policy chief Catherine Ashton, by making the threat of sanctions sound real.

However, EU officials say preparations in Brussels to change gear are moving slowly, despite pressure from the United States. The European Commission will send classified assessments of the impact of economic conflict with Russia on each member state to national capitals on Wednesday.

Any economic sanctions would require delicate burden sharing among EU states. Germany has the most lucrative energy ties, although Moscow is only its 11th trade partner. France has a major warship contract at stake while Britain serves as an offshore financial center to Russia's wealthy.

So far, each has urged the other to move first. London has called for reducing energy dependency and halting arms exports but been coy about stopping financial flows, while Paris has made the case for hitting Russia's elite in its pocket-book.

Lithuania, entirely dependent on Russian gas supplies, wants sanctions to focus on banking and arms sales.

"While they are elaborating papers on what phase three might look like, there is no agreement on a clear trigger," Lehne said. "It's obvious that a Russian invasion would be such a trigger, but short of that, it will very difficult to move towards economic sanctions."

Diplomats said three camps of roughly equal size emerged at Monday's EU meeting. Those pushing towards tougher sanctions were Britain, France, Poland, Sweden, Denmark, the Czech Republic,Estonia, Latvia and Lithuania.

Those most reluctant were Italy, Greece, Cyprus, Bulgaria, Luxembourg, Austria, Spain, Portugal andMalta. An undecided middle camp led by Germany included the Netherlands, Belgium, Finland, Ireland,Romania, Slovakia, Slovenia and Croatia.

Czech Defence Minister Martin Stropnicky spelled out the problems of trying to keep Europe united on sanctions, which require unanimous agreement under the EU treaty.

"It's not that easy always because of course the perception of the crisis is different in the south of Europe and in the north of Europe," he told reporters in Luxembourg.

"Of course we as the Czech Republic are more close to the position of Poland for example or the Baltic states, or Sweden, if I may add, Great Britain, so we are rather urging the union to be firm."