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EU meets Russia for 'clear the air' talks with Putin

By Adrian Croft and Justyna Pawlak

BRUSSELS (Reuters) - Russian President Vladimir Putin and the European Union's top two officials were set to hold "clear the air" talks in Brussels on Tuesday after months of growing tension over Ukraine and trade and energy disputes.

Instead of the normal two-day summit, the EU decided to cut out dinner with Putin on Monday night, sending a message to the Russian leader that it is no longer "business as usual", with relations at their lowest point in years.

The summit will now involve around three hours of face-to-face discussions between Putin, European Commission President of Jose Manuel Barroso and European Council President Herman Van Rompuy, over and after lunch.

Ukraine is set to dominate the talks, after Moscow convinced Ukrainian President Viktor Yanukovich to turn his back on a trade and political association agreement with the EU last November and forge closer ties with Russia instead.

Since then, Russia and the EU have accused each other of interfering in Ukrainian affairs, as protests against Yanukovich's decision have gripped Kiev and other cities, the worst unrest since the Orange Revolution in 2004-2005.

Senior EU officials have made repeated trips to Kiev to meet the protesters and Yanukovich, who has ordered a crackdown against the demonstrations in which at least three protesters have been killed. EU foreign policy chief Catherine Ashton travels to Ukraine on Tuesday.

"NEED FOR STRAIGHT TALKING"

"There is a need for a certain amount of straight talking, to clear the air perhaps, to clarify where we think this relationship is going," a senior EU official told reporters ahead of the summit, speaking on condition of anonymity.

Putin's foreign policy adviser Yuri Ushakov told reporters in Moscow it was "high time for a frank and detailed conversation, including about our joint view of the prospects for Russia-EU relations".

"We are convinced that the potential for interaction is not being fully utilized," he said.

In many respects, the showdown is about reordering power and influence after the collapse of the Soviet Union. The EU's enlargement process of the past decade has drawn in several former Soviet states and satellites. Moscow has pushed back, and is now trying to set up its own Eurasian customs union to rival the EU, preferably with Ukraine as a member.

While the EU never offered Kiev membership, it was keen for Ukraine and other states in the region to sign "association agreements", offering enhanced trade and investment in return for adopting EU standards of law, justice and civil liberties.

The strategy was left in tatters when Kiev spurned the EU after Moscow tightened checks on imports from Ukraine and threatened to cut off its gas supplies. Armenia had already opted to join the Moscow-led customs union.

TRADE AND ENERGY

While the escalating crisis has caused alarm, Russia and the EU were not expected to issue a joint statement and no agreements were expected to be signed on Tuesday.

Adding to the strains are tensions over trade and energy.

The EU relies heavily on imports of Russian gas and, while that gives Moscow a certain amount of leverage, Russia also relies on the EU as a buyer, since other markets are not so developed.

The EU has also launched a World Trade Organization dispute against Russia alleging that it protects its carmakers illegally, while the EU's executive Commission is investigating Gazprom on suspicion of hindering the free flow of gas across Europe and imposing excessively high prices.

Gazprom could be fined up to $14 billion if it is found to have broken EU antitrust rules.

Despite the tensions, two-way trade between Russia and the EU totaled over 330 billion euros ($451 billion) in 2012.

EU leaders are also expected to raise concerns over human rights in Russia, including gay rights, an EU source said.

In what was widely seen as an attempt to improve Russia's image before next month's Winter Olympics in Sochi, Putin has freed members of the Pussy Riot punk protest group, dropped charges against arrested Greenpeace activists and freed Mikhail Khodorkovsky, one of his best known opponents, from jail.

(Additional reporting by Steve Gutterman in Moscow; Editing by Kevin Liffey)

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