Exclusive-Ukraine pitches tougher Russia sanctions plan to EU as US wavers

By Tom Balmforth

KYIV (Reuters) - Ukraine will ask the EU next week to consider big new steps to isolate Moscow, including seizing Russian assets and bringing in sanctions for some buyers of Russian oil, as U.S. President Donald Trump has backed off from tightening sanctions.

A previously unreported Ukrainian white paper to be presented to the EU calls for the 27-member bloc to take a more aggressive and independent position on sanctions as uncertainty hangs over Washington's future role.

Among 40 pages of recommendations were calls to adopt legislation that would speed up the EU's seizure of assets from sanctioned individuals, and send them to Ukraine. Those under sanctions could then seek compensation from Russia.

The EU should consider a range of steps to make its sanctions apply more forcefully beyond its own territory, including targeting foreign companies that use its technology to help Russia, and "the introduction of secondary sanctions on purchasers of Russian oil".

Such secondary sanctions, which could hit big buyers such as India and China, would be a major step that Europe has so far been reluctant to take. Trump had publicly discussed this before taking the decision not to act for now.

The white paper also calls for the EU to consider using more majority-rules decision making over sanctions, to prevent individual member states from blocking measures that otherwise require unanimity.

After speaking to Putin on Monday, Trump opted not to impose fresh sanctions on Russia, dashing hopes of European leaders and Kyiv who had been lobbying him for weeks to ratchet up pressure on Moscow.

Trump spoke to Ukrainian and European leaders after his call with Putin and told them he didn't want to impose sanctions now and to give time for talks to take place, a person familiar with conversation told Reuters.

The EU and Britain imposed additional sanctions against Russia on Tuesday anyway, saying they still hope Washington will join them. But Europeans are openly discussing ways they can maintain pressure on Moscow if Washington is no longer prepared to participate.

'CATALYSE THE EU'

Publicly, Ukraine has tried to avoid any hint of criticism of Washington since President Volodymyr Zelenskiy received a dressing down from Trump in the White House in February.

The sanctions white paper emphasises the "unprecedented" sanctions imposed by the EU so far and talks up their potential to do more. It also includes a stark assessment of the Trump administration's commitment to coordination efforts so far.

"Today, in practice, Washington has ceased participation in nearly all intergovernmental platforms focused on sanctions and export control," it said.

Washington had slowed work in the monitoring group for enforcing price caps on Russian oil, dissolved a federal taskforce focused on prosecuting sanctions violations and reassigned a significant number of sanctions experts to other sectors, it added.

It noted that two potentially major U.S. sanctions packages had been drawn up - one by the government and another by pro-Trump senator Lindsey Graham - but that it was "uncertain" whether Trump would sign off on either of them.

Uncertainty over the U.S. stance had slowed the pace of economic countermeasures and multilateral coordination, but "should not prompt the European Union to ease sanctions pressure", it said.

"On the contrary, it should catalyse the EU to assume a leading role in this domain."

'HUGE STRIKE'

Ukraine is worried that Washington peeling away from the Western consensus on sanctions could also cause vacillation in the EU, which traditionally requires consensus for major decisions.

"American withdrawal from the sanctions regime (would) be a huge strike on the unity of the EU. Huge," a senior Ukrainian government official told Reuters.

The EU cannot fully replace the heft of the United States in applying economic pressure on Russia. Much of the impact of U.S. sanctions comes from the dominance of the dollar in global trade, which the euro cannot match.

Still, U.S. sanctions relief for Russia would not spur a significant return of foreign investors and investment if Europe held firm, said Craig Kennedy, a Russian energy expert at the Davis Center, Harvard.

"Europe holds a lot more cards than you'd think," he said.

(Reporting by Tom Balmforth; Editing by Mike Collett-White and Peter Graff)