EU not seen matching U.S. threat of sanctions against Russia

By Justyna Pawlak and Luke Baker BRUSSELS (Reuters) - The European Union is unlikely to match the United States in threatening sanctions against Russia when its foreign ministers meet to discuss Ukraine on Monday, instead pushing for mediation between Moscow and Kiev, officials say. The emergency talks, convened after Russian President Vladimir Putin secured parliamentary approval on Saturday to invade Ukraine, are expected to result in a strongly worded statement of condemnation, but no immediate punitive measures. That will leave the EU a step behind the United States, with U.S. Secretary of State John Kerry threatening visa bans, asset freezes and trade restrictions against Russia on Sunday, following the seizure of the Ukrainian peninsula of Crimea. "American businesses may well want to start thinking twice about whether they want to do business with a country that behaves like this," Kerry said, describing Russia's actions as something out of the 19th century. For their part, European governments will take a more cautious approach, diplomats said, with any prospect of sanctions against Russia unlikely to be spelled out directly. Instead, several EU member states will urge international mediation between Russia and Ukraine, possibly through Europe's democracy watchdog, the Organisation for Security and Cooperation in Europe, or via the United Nations. Germany, France, Britain, the Netherlands and Finland are among those favoring mediation and efforts to calm the crisis, diplomats indicated. German Chancellor Angela Merkel spoke to Putin by phone on Sunday evening and proposed a "fact-finding" mission to start a political dialogue. A German government spokesman said Putin had accepted the idea. Finland, which shares a border with Russia, said EU leaders or the OSCE could play a role in "seeking solutions and carrying them out, especially in protecting the rights of minorities". The seizure of Crimea has created the greatest moment of tension between Russia and the West since the collapse of the Soviet Union in 1991, an event Putin has described as the worst geopolitical catastrophe of the 20th century. Speaking to Merkel by phone on Sunday, U.S. President Barack Obama underscored the "complete illegitimacy" of Russia's action in Crimea. A senior U.S. official said Obama would make the same point to the leaders of Britain and Poland. But many Europeans are concerned about pushing Putin too far, mindful of their deep economic links with Russia, including a heavy dependence on Moscow's gas and oil exports. There is also concern about the time and legal hurdles sanctions require. Moscow has said it is merely protecting the lives of Russian-speaking nationals, and appears to be calculating that the West cannot afford to risk a wider conflagration by taking anything approaching military action. CLOSE RELATIONS Russia is the EU's most important trading partner after the United States and China, with 123 billion euros ($170 billion) of goods exported there in 2012. It is also the EU's most important single supplier of energy products, accounting for more than a quarter of all EU consumption of oil and gas. Relations between Brussels and Moscow have deteriorated over the last year, with EU governments expressing anger over Moscow's pressure on former Soviet republics hoping to forge closer economic ties with Europe, including Ukraine. Tensions reached new heights when Moscow persuaded Ukrainian President Viktor Yanukovich to reject a trade deal with the EU in November, a decision that sparked three months of mass protests that led directly to his overthrow. One decision that could be agreed by EU foreign ministers is asset freezes against Ukrainians accused of misappropriating public funds, similar to measures taken by Austria, Switzerland and Lichtenstein last week. Austria announced on Saturday that it was blocking the bank accounts of Yanukovich and 17 others, following a request by Ukraine's new authorities. Ukraine's new leaders have accused Yanukovich of embezzling as much as $37 billion in three years. "One option we still have open is asset freezes against Ukranians," said an EU diplomat. "To make sure money doesn't disappear over time. This may be a track that can be explored by all of us." (Writing by Justyna Pawlak, editing by Luke Baker and Alistair Lyon)