By Laurence Norman
BRUSSELS--European Union leaders were set to request new options
for stepping up sanctions on Russia on Saturday, although some
countries remained hesitant about further straining relations with
the Kremlin over the Ukraine conflict.
With pro-Moscow rebels making fresh gains on the ground, a host
of EU leaders, including French President François Hollande, U.K.
Prime Minister David Cameron and European Commission President José
Manuel Barroso said the deteriorating situation in eastern Ukraine
necessitated an EU reaction.
"I expect the leaders of the European Union member states...to
be ready for a new round of sanctions following the recent
escalation and further destabilization of Ukraine. That's what they
have said and that's what I expect them to do," Mr. Barroso said
after a meeting with Ukrainian President Petro Poroshenko.
Mr. Hollande said that probable incursions by Russian troops
inside Ukraine will "no doubt" lead the EU to slap a new round of
sanctions on Moscow. Mr. Cameron said Russia must face
"consequences" if it doesn't pull troops out of Ukraine.
Russia denies sending any troops into Ukraine. It has demanded
the release of a group of Russian soldiers captured in Ukraine who
Moscow said accidentally crossed the border.
EU leaders were meeting in Brussels on Saturday to agree their
picks for two top EU jobs and to discuss the crisis in Ukraine and
other foreign policy issues. Mr. Poroshenko was due to join the
summit.
Shortly before the meeting started, an updated draft statement
said the bloc "stands ready to take further steps, in light of the
evolution of the situation on the ground."
"It requests the commission to urgently undertake preparatory
work, jointly with the" EU's foreign-service unit.
It wasn't clear how quickly EU governments would be able to
decide on fresh measures or whether they would give Russia some
time to draw back its support.
Still, some leaders remained cautious about rushing into new
measures against Russia. There have already been warnings from the
leaders of Hungary and Slovakia that the sanctions agreed so far
were ineffective and could hurt EU economies as much as Russia.
Earlier this month, Russia banned many agricultural imports from
the EU in retaliation against the EU's latest restrictions.
Austrian Chancellor Werner Faymann said the bloc should be
"speaking less" about sanctions.
"The effect of sanctions as they have been applied so far hasn't
always produced what some expected," he said.
In July, the EU for the first time agreed broad measures against
Russia's economy, the sharpest steps since Moscow annexed Crimea in
March.
The measures included a ban on purchasing newly issued bonds and
shares in five Russian majority state-owned banks. The EU agreed on
an arms embargo and a ban on the sale of dual-use goods to military
end-users in Russia, although leaders agreed current contracts
could be fulfilled.
The bloc also agreed to stop exports of high-end technology to
be used in deep-water oil exploration and production.
Mr. Barroso said the allegations that hundreds of Russian troops
have crossed into Ukraine was a "grave transgression" and
escalation of the crisis.
He said the bloc would consider additional financial assistance
for Ukraine, on top of the EUR1 billion ($1.31 billion) Ukraine
could receive from the bloc under already earmarked plans.
"This is the most serious crisis since the end of the Cold War,"
Mr. Hollande said in a short televised address before leaving Paris
for Saturday's meeting. "Up against these worsening tensions,
decisions must be made."
Mr. Hollande said he had spoken with Russian President Vladimir
Putin on Friday to express his hope for a negotiated solution to
the conflict in eastern Ukraine.
At the news conference, Mr. Poroshenko again requested limited
military assistance from the bloc. Lithuanian President Dalia
Grybauskaite supported that call and one EU diplomat said several
governments wanted leaders to agree to allow individual member
states to provide military material if they so wished.
"We are in a very serious, I would say dramatic situation," Mr.
Barroso said. "We may see a situation where we reach the point of
no return," he said. I believe it's still not too late to find a
political solution."
In Kiev, officials Saturday accused Russia of sending more
troops and equipment across the border and destroying a small
village near Luhansk. That claim couldn't immediately be
verified.
"Direct military aggression by the Russian Federation in the
east of Ukraine is continuing. The Russians are continuing to send
military equipment and 'mercenaries,'" Ukraine's National Security
and Defense Council said in a Twitter post. Russia has denied
sending troops and equipment, though rebels have contradicted that,
saying this week that the troops came during vacation.
Rebels continued their advance against Ukrainian forces in the
region Saturday, pushing back around Luhansk, a rebel stronghold
that Kiev's forces had come close to encircling earlier this month,
officials said.
There were reports Ukrainian units surrounded near Donetsk
sustained heavy casualties in an effort to break free, but the
Defense Ministry said information on that area would be released
only later for security reasons.
Greg White in Moscow, Sam Schechner in Paris, Frances Robinson
in Brussels contributed to this article.
Write to Laurence Norman at laurence.norman@wsj.com