Russia and Ukraine don’t make much progress in talks in Milan

Russia, Ukraine and European governments failed to make any progress towards solving the crisis in Ukraine on Friday in talks that the Kremlin said were "full of misunderstandings and disagreements."

Further discussions were scheduled later in the day, but there were few expectations of any immediate accord to strengthen a faltering ceasefire in eastern Ukraine or to end a row over blocked Russian gas supplies to Ukraine.

"I cannot see a breakthrough here at all so far," German Chancellor Angela Merkel said after top EU leaders met Russian President Vladimir Putin and Ukrainian President Petro Poroshenko on the sidelines of an EU-Asia (ASEM) summit in Milan.

"We will continue to talk. There was progress on some details, but the main issue is continued violations of the territorial integrity of Ukraine," she added, clearly pinning the blame for the impasse on Moscow.

The West has clamped sanctions on Russia in response to its annexation of Crimea in March and its support for pro-Russian separatists battling government troops in the east of Ukraine.

Kyiv and its Western backers accuse Moscow of aiding the separatist revolt by providing troops and arms. Russia denies the charges but says it has a right to defend the interests of the region's Russian-speaking majority.

The European leaders urged Russia to do more to end constant, deadly violations of a ceasefire that was agreed by Putin and Poroshenko last month in Minsk, saying Russia must fulfil its commitments and withdraw forces from the area.

Officials said local elections in eastern Ukraine and the issue of using unmanned drone aircraft for surveillance of the borders between Russia and Ukraine were particular sticking points, with Russia pushing to have its drones flying alongside those already offered for the mission by France and Germany.

'Biased, non-diplomatic'

A smiling Putin emerged from the morning to tell reporters: "It was good, it was positive." However, Kremlin spokesman Dmitry Peskov later gave a very different readout, saying "certain participants" had taken an "absolutely biased, non-flexible, non-diplomatic" approach to Ukraine.

"The talks are indeed difficult, full of misunderstandings, disagreements, but they are nevertheless ongoing, the exchange of opinion is in progress," he said.

Merkel's position as German leader in effect means that she sets the tone of EU relations with Russia, and she has taken the lead within Europe in trying to persuade Putin to change tack over Ukraine. She had a rocky time in Milan, however, with one German official saying the Russian leader had not displayed a "too constructive mood."

An initial meeting set for Thursday was delayed for hours because Putin flew into Italy well behind schedule. They then held more than 2-1/2 hours of talks that ran well past midnight, with both sides acknowledging discussions had been unproductive.

On Friday, Merkel reprimanded the former Soviet KGB spy in front of the assembled leaders at a closed-door session of the ASEM, according to people present.

After a speech in which Putin raised doubts about the sovereignty of Ukraine, Merkel reminded him of the 1994 Budapest agreement, in which Russia recognised the sovereignty and territorial integrity of Ukraine, including Crimea.

"Unfortunately, I am not very optimistic," a glum Poroshenko was overheard telling Austrian Chancellor Werner Faymann.

Gas cut off

The crisis in relations with Kyiv has led Russia to cut gas supplies because of unpaid bills. The European Union fears this could threaten disruptions in the gas flow to the rest of the continent this winter, and is working hard to broker a deal.

Russia is Europe's biggest gas supplier, accounting for around a third of demand, and about half the Russian gas that the EU buys comes via Ukraine.

The stand-off over pricing is the third in a decade between Moscow and Kyiv, though this time tensions are higher because of the fighting in eastern Ukraine.

European Commission President Jose Manuel Barroso said Russian, Ukrainian and EU officials would meet in Brussels to try to resolve the gas row.

Putin had warned on Thursday that Russia would reduce gas supplies to Europe if Ukraine took gas from the transit pipeline to cover its own needs, although he added that he was "hopeful" it would not come to that.

More than 3,600 people have died in eastern Ukraine since fighting broke out in mid-April when armed separatists declared they were setting up their own state.

Although Putin announced this week that Russian troops near the border with Ukraine would be pulled back, Western officials want to see clear evidence that Moscow is acting on this.

"Vladimir Putin said very clearly he doesn't want a 'frozen conflict' and doesn't want a divided Ukraine. But if that's the case, then Russia now needs to take the actions to put in place all that has been agreed," said British Prime Minister David Cameron.

"If those things don't happen, then clearly the European Union, Britain included, must keep in place the sanctions and the pressure so we don't have this sort of conflict in our continent."

(Writing by Crispian Balmer; Additional reporting by Elizabeth Pineau, Steve Scherer, Elvira Pollina, Francesca Landini, Giulio Piovaccari, Alessandra Galloni and James Mackenzie in Milan; Editing by Kevin Liffey)