By Alastair Macdonald and Jan Strupczewski
BRUSSELS (Reuters) - European Union leaders warned Moscow they are ready to flex their combined muscle and "stay the course" in a long confrontation with Russia if President Vladimir Putin refuses to pull back from Ukraine.
"We must go beyond being reactive and defensive. As Europeans we must regain our self-confidence and realize our own strengths," said Donald Tusk, the former Polish premier who chaired a brief EU summit in Brussels on Thursday.
In comments that were part warning to Russia, where falling oil prices and Western trade sanctions have brought financial havoc, and part exhortation to an EU bloc divided between hawks and doves, Tusk said a united European front was vital.
"It is obvious we will not find a long-term perspective for Ukraine without an adequate, consistent and united European strategy toward Russia," he added, after the first meeting he has chaired as president of the leaders' European Council.
"Today we are maybe not too optimistic," said Tusk, who learned his politics as an anti-Soviet student activist in the 1980s. "But we have to be realistic, not optimistic."
Meeting on a day when Putin mounted a wordy defense of policies on Ukraine and the economy, the leaders of the 28 EU states conferred on how to handle their giant eastern neighbor longer term, after a year of crisis and mutual trade sanctions that have brought warnings of a return to Cold War.
Some in the EU have said they should switch their focus away from backing Ukraine to a detente with Moscow. That might help European businesses, which have suffered loss of trade with Russia and fear a spillover from the rouble crisis.
But for all their continuing differences in attitudes to Russia, leaders voiced their determination to stick together as they have over the past year, while brandishing at Putin the stick of more sanctions and carrot of renewed cooperation.
They agreed to keep up financial aid to help Ukraine carry out reforms to its post-Soviet political and economic systems.
"Russia is today our strategic problem, not Ukraine," said Tusk, who as Polish prime minister was among the hawks from Moscow's former communist satellites who pushed for sanctions.
In what one diplomat said was a conscious evocation of a line from Cold Warrior Ronald Reagan during a 1982 U.S. election campaign, Tusk inserted into the official communique on measures to punish Russia the phrase "the EU will stay the course".
Another said more conciliatory leaders, such as Italy's Matteo Renzi, appeared to have hardened their attitude to Moscow in the face of what they saw as continued aggression by Putin.
CARROT AND STICK
Having enacted some previously agreed new sanctions on Thursday, they made no move to further escalate measures against Moscow. And they made clear that, like the United States, they would ease them if Putin honored a four-month-old peace deal.
"The door is always open if Russia changes its behavior," said British Prime Minister David Cameron. "If it takes Russian troops out of Ukraine, and it obeys all the strictures of the Minsk agreement, these sanctions can go."
But German Chancellor Angela Merkel, whose foreign minister flew to Kiev on Friday aiming for new peace talks, stressed: "Sanctions can only be lifted if the reasons for them change."
Foreign Minister Frank-Walter Steinmeier, a senior Social Democrat in the conservative Merkel's coalition, later said he was concerned about "turning the screw" of sanctions further and said the conflict must not run "out of control".
Jean-Claude Juncker, the new head of the executive European Commission, said dialogue was still important, saying: "We have to keep channels of communication open."
In a mark of Tusk's determination to play a leading role in EU policymaking, the Pole started the summit on time, before Merkel and French President Francois Hollande arrived, several diplomats said. Keen to show business-like vigor, Tusk also wound the summit up early, cancelling a second day on Friday.
(Additional reporting by Paul Taylor, Adrian Croft, Robin Emmott, John O'Donnell, Franceso Guarascio, Tom Koerkemeier, Gregory Blachier and Andreas Rinke in Brussels and Alexandra Hudson in Berlin; Writing by Alastair Macdonald)