By Stephanie Nebehay and Christian Lowe GENEVA/MOSCOW (Reuters) - Foreign ministers from East and West will try to defuse the Ukraine crisis on Thursday in Geneva, once frequently the scene of Cold War negotiations, but will risk being upstaged by Russian President Vladimir Putin. With Russian troops massed on the border with Ukraine, prospects of significant progress at the four-way talks appear slim. By contrast, what Putin says during his annual "hotline" session with the Russian people may have far greater influence on events in Ukraine's rebellious east. Thursday's talks will bring the ministers of Russia, Ukraine and the United States together with the European Union's foreign policy chief to discuss a crisis in which Kiev is struggling to reassert its authority in eastern towns largely controlled by armed pro-Russian separatists. Upon arriving in Geneva on Wednesday, Ukrainian Foreign Minister Andrii Deshchytsia said there still is time for negotiations to ease tensions with Russia. "I think that we still have a chance to de-escalate the situation using the diplomatic means," he said. "And we will try hard. We are trying hard - not only Ukraine - but also the United States. However, the time is now, not only to express the concerns, but to look for a more concrete and adequate response to Russia's plans and actions." Kiev and the West believe Moscow is stirring up the unrest and a senior U.S. official made clear that Russian leaders had to de-escalate the crisis. "The idea here is that they would stop aiding and abetting and supporting these separatists and that they would pull their troops back from the borders," the official told reporters as Secretary of State John Kerry flew to Geneva. Other U.S. officials said in Washington they did not anticipate a breakthrough in Geneva, adding that it was reasonable to assume that more sanctions would be imposed against Russia if there was no progress. Additional sanctions could come from Washington as soon as Friday. U.S. President Barack Obama said on Wednesday that Russia can expect further sanctions if it steps up support for separatists in eastern Ukraine. "What I have said consistently is that each time Russia takes these kinds of steps that are designed to destabilize Ukraine and violate their sovereignty, that there are going to be consequences," he said in an interview with CBS. "Mr. Putin's decisions are not just bad for Ukraine, over the long term they're going to be bad for Russia," he said. Putin has accused the Ukrainian government of risking mass bloodshed by using its military to try to crush the rebellion in the largely Russian-speaking East. "The sharp escalation of the conflict puts the country, in effect, on the brink of civil war," the Kremlin quoted Putin as telling German Chancellor Angela Merkel this week. DIPLOMACY TRAILS EVENTS ON GROUND With East-West relations at their worst since the Soviet Union collapsed more than two decades ago, Washington and the EU have expressed concern about the 40,000 Russian troops - enough to take eastern Ukraine in days - that NATO says are assembled near the Ukrainian frontier. Moscow, which seized control of Ukraine's Crimea region and then rapidly annexed it last month, insists the troops are merely conducting exercises. As in the case of Crimea, diplomacy appears to have fallen far behind the pace of events on the ground, with the separatists establishing control of territory before Western countries can muster a response. This bodes ill for the talks in Geneva, where the U.S. and Soviet leaders once met and officials worked deals on nuclear weapons. The European Commission handed documents to EU member states on Wednesday explaining the potential impact on their economies of stricter trade and financial sanctions, diplomats said. The documents examine several categories, including on energy, finance and trade. A number of EU countries that rely heavily on Russian gas supplies are nervous about possible retaliation from Moscow. One EU diplomat briefed on the process said the measures had to be balanced, saying, "We can't have a situation where a set of sanctions ends up having a retaliatory impact on one member state, or two or three member states. If there are going to be repercussions from this, they have to be shared out." Putin has shown no sign of backing down before his question-and-answer session, an event that has become a national institution over more than a decade and lasts on average about four hours. The president traditionally speaks about matters close to the hearts of ordinary Russians such as dilapidated housing, inefficient local authorities and inflation. But on the eve of the event, for which Russians had registered more than 1.5 million questions by Tuesday, presidential spokesman Dmitry Peskov said Putin would give an extensive assessment of the U.S. and EU sanctions. Deshchytsia went to Geneva with a weak hand as his government's offensive to regain control of official buildings occupied by rebels in about 10 eastern towns has made humiliatingly little progress. Separatists flew the Russian flag on armored vehicles taken from the Ukrainian army on Wednesday. Six of them were driven into the rebel-held town of Slaviansk to shouts of "Russia! Russia!" It was not immediately clear whether they had been captured by rebels or handed over to them by Ukrainian deserters. Armed pro-Russia separatists also attacked a Ukraine base in the eastern city of Mariupol on Wednesday and national guard soldiers fired shots in the air to turn them back. A government statement did not say if anyone was injured in the attack. (Additional reporting Arshad Mohammed and Catherine Koppel in Geneva, Alexei Anishchuk in Moscow and Jeff Mason in Washington; Writing by David Stamp; Editing by Bill Trott and Ken Wills)
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