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* New meeting of EU governments may be required for decisiveaction
* Meeting Tuesday could decide on names, companies
* Next summit scheduled for end-August
* Economic sanctions could have heavy price for fragile EU
By Barbara Lewis
BRUSSELS, July 21 (Reuters) - For all the tough talk, Europeis not likely to punish Russia over last week's downing of anairliner over Ukraine beyond speeding up the imposition ofalready agreed individual sanctions when the bloc's foreignministers meet on Tuesday.
The severity of future European Union sanctions could dependon the Netherlands, which suffered the greatest loss of lifewhen the Malaysia Airlines flight was brought down.
U.S. President Barack Obama has piled pressure on Europe fora more forceful response and the three leading EU powers -Britain, France and Germany - said they should be ready toratchet up sanctions.
Britain, in particular, said it was willing to suffer theeconomic consequences.
But diplomats said Tuesday's meeting was not expected to gofurther than agreeing on companies and people to be hit withasset freezes under a more aggressive framework agreed lastweek. Previously, they had only said they would decide on thelist by the end of July.
Several diplomats said moving towards more sweeping economicsanctions could only be decided by heads of government. Theattitude of the Netherlands, which lost 193 people in theincident, would be critical, diplomats said.
The next scheduled summit of EU leaders is on Aug. 30,although EU members could call for another emergency meeting.
"The impulse must come from The Hague because they have themoral mandate to demand a resolute, firm reaction. Everythingdepends on that," one EU diplomat said on condition ofanonymity.
"I think the events will serve to speed up sanctions, but aslong as no new European council (of leaders) is called,ministers cannot go further even if they want to," another EUdiplomat said.
PROOF?
A summit of EU leaders on July 16, the day before theairliner was shot down, agreed the EU would sanction Russiancompanies that help to destabilise Ukraine and block new loansto Russia.
The wording was deliberately vague as the meeting agreed totarget "entities, including from the Russian Federation, thatare materially or financially supporting actions undermining orthreatening Ukraine's sovereignty".
The United States and its allies have blamed pro-Russianrebels and Moscow itself over the downing of the plane. Russiahas denied involvement.
Speaking in parliament on Monday, Dutch Prime Minister MarkRutte said the EU would impose further sanctions on Russia if itwere proved that Russia was directly or indirectly responsiblefor bringing the plane down.
His words cast doubt over whether the disaster would proveto be a turning point for international pressure to resolve thecrisis in Ukraine, which has killed hundreds since pro-Westernprotests toppled the Moscow-backed president in Kiev in Februaryand Russia annexed the Crimea peninsula a month later.
On Monday, EU diplomats made clear sectoral sanctions wouldstill be extremely difficult for some of Europe's poorernations. They are especially nervous about the energy sector,central to the Russian economy, but also to the European Union.
EU nations rely on Russia for about 30 percent of their gasdemand and have intertwined interests based on decades of energyreliance. According to U.N. data, excluding Russian gas exports- around $60 billion a year - the Netherlands was Russia'sbiggest export destination last year, mostly oil and metals.
"Energy sanctions would most likely derail the fragileEuropean recovery in general and could even lead to a completeeconomic collapse in certain member states," one diplomat said."I don't see how collective economic suicide serves us or theUkrainians."
While some member states, such as Britain, do not rely onRussian gas, others are 100 percent dependent on Russia, havingno other suppliers. In volume terms, Germany and Italy have thebiggest exposure.
Diplomats said that if energy had to be part of anysanctions regime, the European Union would have to agree ways toshare the financial burden.
Britain has said it too would suffer from any economicsanctions but it is willing to pay the price.
"I would say ... any sanctions will have an economic impact,and we are prepared to undertake further sanctions," BritishFinance Minister George Osborne told BBC radio's Today programmeon Monday. "But think of the economic hit ... of allowinginternational borders to be ignored, of allowing airlines to beshot down - that's a much greater economic hit for Britain andwe're not prepared to allow that to happen."
London is a prime destination for Russian businesses andRussian oligarchs are major property owners in Britain.
Energy major BP already faces the prospect of falloutfollowing the U.S. decision to sanction Russia's largest oilfirm Rosneft, of which BP owns a fifth.
Another sensitive area is defence. France has said so far itis going ahead with a 1.2 billion euro ($1.6 billion) contractto supply Mistral helicopter carriers to Russia becausecancelling the deal would do more damage to Paris than toMoscow.
On Monday, a French defence ministry official said anydecision on whether to suspend the delivery of the first warshipwould only take place in October. ($1 = 0.7395 Euros) (Additional reporting by Jan Strupczewski and Justyna Pawlak inBrussels and Marine Pennetier in Paris, Tom Miles in Geneva andThomas Escritt in Amsterdam; editing by Philippa Fletcher)
