EU leaders to pledge more Ukraine money, threaten Russia sanctions

It says that following a recent EU aid payment of €500 million “the Union and its member states stand ready to further facilitate and support Ukraine's reform process”.

It notes the “situation in eastern Ukraine remains a strong concern” and urges both sides to implement the 5 September ceasefire accord.

It warns “the European Council is ready to take further steps if necessary” in a reference to Russia sanctions. It also says EU countries plan to impose a ban on investments in Russia-annexed Crimea on 15 December, three days ahead of the EU leaders’ final 2014 meeting in Brussels.

Ukraine installed a new government on 27 November.

In an unusual step designed to assuage popular domestic and foreign fears over deep-rooted corruption in its political elite, it granted citizenship to an American businesswoman, a Georgian official, and a Lithuanian banker and appointed them as its ministers of finance, health, and economy.

It also plans to hire a foreigner to run its new anti-corruption bureau in future.

The draft conclusions’ pledge of further aid come amid reports that its current EU and International Monetary Fund (IMF) bailout is not enough to prevent bankruptcy due to the economic contraction caused by the war.

The IMF has so far paid out $8.2 billion of a $17 billion package to cover the period until 2016, while the EU has committed €1.6bn ($2bn).

But EU officials believe it needs another $15 billion to stay in the black - an amount equal to the bloc’s entire budget for the six states in its eastern neighbourhood programme for the next seven years.

They are also unimpressed by the foreign appointments, noting that they lack the power to stand up to Ukrainian president Petro Poroshenko and PM Arseniy Yatsenyuk.

Meanwhile, the talk of increasing EU sanctions comes amid uncertainty over Russia’s next move.

Ukrainian forces on Tuesday observed a “Day of Silence” in the east Ukraine conflict zone amid attempts to revive ceasefire talks with Russia and Russia-controlled rebels in Minsk in the coming days.

But the same day Russian foreign minister Sergei Lavrov indicated that the price of peace will be to grant autonomy to the Russia-occupied “republics” in Donetsk and Luhansk - a red line for Kiev.

“We are convinced that now a systematic problem, namely Kiev’s inability to launch the constitutional process [federalisation], has emerged to prominence”, he told press in Moscow.

He also criticised German chancellor Angela Merkel’s increasingly Russia-critical statements.

"We can't not express our concern over what our German colleagues are doing," Lavrov told a news conference.

“We can't not express our concern over what our German colleagues are doing … Germany has traditionally played a very constructive role regarding EU ties with Russia and the West as a whole with Russia. If Germany would decide to move to issuing orders, then Europe wouldn't win from that and neither would Germany”, he said.

The same day Russia also announced that it would send another unauthorised convoy of “aid” truck to the rebel zones - the ninth one since its invasion of Ukraine in February.

Despite the harsh words, Germany and the EU foreign service are said to be putting together a new offer to Russia to encourage it to back down.

A Lithuanian contact told EUobserver the centrepiece of the “package” will be new trade talks between the EU and the Russia-led Eurasian Customs Union.

Few in Brussels believe Russia’s war on Ukraine has anything to do with commercial concerns linked to the EU-Ukraine free trade pact.

But the initiative amounts to recognition the EU is locked in an assymetrical confrontation with Russia: it is unwilling to use military force; it has no agreement to offer Ukraine an EU membership perspective; no way to stop Russian gas purchases without provoking a new economic crisis in Europe; and no Russia-type propaganda machine.

“When Germany talks tough, it usually means it is preparing to act soft”, the Lithuanian contact said.

“What kind of message will it send to people in Ukraine, or in Georgia and Moldova? That we are preparing to make concessions to Russia over their heads despite its behaviour?”, the source added.