EU leaders set for frosty dinner with Ukraine's Yanukovich

By Luke Baker BRUSSELS (Reuters) - European leaders will come face-to-face with Viktor Yanukovich on Thursday for the first time since the Ukrainian president spurned their offer of a free-trade deal and decided to seek closer ties with Russia instead. In a meeting that promises to be one of the frostier moments of political theatre this year, Yanukovich plans to attend a dinner in the Lithuanian capital Vilnius to honor the Eastern Partnership, the EU's four-year-old program of outreach to former Soviet states. Ukraine had been expected to sign a far-reaching free-trade and political association deal with the EU at the Vilnius summit, the result of years of negotiation. But last week, following intense pressure from Moscow and growing concerns about Ukraine's dire economic situation, Yanukovich announced he wasn't ready to sign the EU deal yet and would bolster links with Russia. It is not clear what the Ukrainian leader hopes to achieve by attending the Vilnius dinner, especially after dismissing the EU's trade offer, which would have come with around 600 million euros ($800 million) of financial support, as "humiliating". But he appears minded to keep his options open, accepting short-term support from Moscow, which supplies Ukraine with gas, without committing to Russia's Customs Union with Kazakhstan and Belarus, and all the while keeping the EU within reach. "When it corresponds to our interests, when we have agreed (with the EU) on normal conditions, then we can consider signing," he said on Tuesday. "When will we sign? Soon or not soon? I would like the time to be as soon as possible." EYE ON THE PRIZE Though Ukraine is not playing ball, the EU will go ahead with initial political association agreements with Georgia and Moldova in Vilnius, putting them on track to formally sign in around a year's time, and ink a visa agreement with Azerbaijan. Belarus and Armenia will also attend the summit, though they are not taking further steps closer to the EU at this stage. But the biggest prize in the Eastern Partnership was always Ukraine, a vast country of 46 million people that borders four EU member states, and it will be something of an elephant in the room during the dinner on Thursday night. EU leaders, including German Chancellor Angela Merkel, French President Francois Hollande and British Prime Minister David Cameron, will hold a pre-dinner meeting in Vilnius to work out how to handle the situation with Yanukovich, officials said. Herman Van Rompuy, the president of the European Council, who liaises between the EU's 28 member states, has said the offer to Ukraine remains on the table, despite there being next to no chance Yanukovich will change his mind at the last minute. Instead, the dinner may be an opportunity for EU leaders to press the case of jailed former prime minister Yulia Tymoshenko, a bitter Yanukovich rival who was convicted of abuse of power in 2011, after a trial the EU described as selective justice. Tymoshenko declared a hunger strike on Monday and has given her support to the tens of thousands of Ukrainians who have demonstrated in Kiev against the rejection of the EU deal, the biggest outpouring of unrest since the 2004 Orange Revolution that helped bring Tymoshenko to power. Yanukovich this week demanded that the EU stop meddling in her case. WAY FORWARD? EU leaders may also try to understand from Yanukovich how he intends to balance his acceptance of help from Russia with his stated aim of moving closer to the EU. Russia and Ukraine have suggested three-way talks with the EU, but that is not something officials in Brussels will accept. "These are bilateral programs between the EU and the Eastern Partnership countries. It's not about negotiating three-ways with Russia," said an official from Lithuania, which holds the EU presidency and has planned the Vilnius summit. "Not only that, but it's an insult to the other Eastern Partnership countries if one of them needs to negotiate its position together with Russia. It just doesn't work like that." It is not clear what combination of threats and inducements Russian President Vladimir Putin made to get Yanukovich to shift position, but diplomats in Brussels, Kiev and Moscow have suggested Russia will give Ukraine a more favorable gas-supply deal and better terms on repaying 1.3 billion euros of debt. It will also reopen trade flows that have been interrupted since Yanukovich started making his overtures to Brussels. Yanukovich may need Moscow's support if he is to be returned to office after elections in 2015, political analysts say, and by rejecting the EU deal he has sidestepped two dangers: the demands for Tymoshenko's release and the cost of adopting EU regulations that come with the free-trade agreement. Some EU diplomats are quietly relieved that the deal with Ukraine fell through, saying a bullet had been dodged. Ukraine's many problems, including a collapsing currency, vast debts and no lifeline from the International Monetary Fund, are now Moscow's burden more than Brussels'. But it's also not clear whether Ukraine can live up to Russia's expectations, including joining the Customs Union. If not, Kiev could be left out in the cold again, and might return to the EU deal in a few months' time, some officials say. ($1 = 0.7374 euros) (Writing by Luke Baker; Editing by William Waterman and Giles Elgood)