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* Rift could see sanctions on Assad lapse, compromise likely

* Britain, France push for freedom to arm rebels

* Others fear lifting ban could harm peace conference

By Adrian Croft

BRUSSELS, May 26 (Reuters) – The European Union may end this

week either helping Syrian rebels or the Damascus government

they detest, depending on how EU ministers resolve differences

over a package of sanctions on Syria that is about to lapse.

At a meeting in Brussels on Monday, the main EU military

powers, Britain and France, will argue forcefully for easing

some of that embargo to help channel weapons to rebels fighting

President Bashar al-Assad. But Austria, Sweden and several

others will defend maintaining the sanctions across the board.

Failure to find a compromise could mean the entire package

simply vanishes when it expires on Saturday, June 1 – London has

already raised the stakes by threatening to veto a full renewal.

But it is unlikely the EU will offer such a shot in the arm

to Assad by giving up on measures intended to cripple his

government’s ability to trade and raise money and also to curb

the movements and personal wealth of his family and confidants.

EU officials see compromise – possibly by delaying an easing

of the arms embargo until after peace talks or by limiting the

types of weapon allowed and which rebel groups may receive them.

“I think everyone is manoeuvring here,” said Shashank Joshi

at London think-tank the Royal United Services Institute.

“The Brits are very keen to show they will take this quite

far. Will they actually pull the trigger? Will they get rid of

the entire apparatus of sanctions and asset freezes that this

entails? I am not so sure.”

The debate over the arms embargo has gained urgency because

of recent military gains by Assad’s troops against rebels whose

political goal in ending the Assad dynasty’s authoritarian rule

the 27-nation European Union has endorsed diplomatically.

Opponents say taking a decision now to allow arms to be sent

to the rebels could undermine next month’s planned international

peace conference, sponsored by the United States and Russia, and

they are using this as an argument to extend the full embargo.

COMPROMISES

Britain and France say they have no immediate plan to arm

the rebels but argue that easing the EU embargo would strengthen

the hand of the West and the opposition in the negotiations.

Austria has warned that it could stop patrolling the U.N.

ceasefire line on the Golan Heights between Israel and Syria if

the EU arms embargo were lifted; Vienna says that the EU would

be putting its troops at risk by making the European Union a

military ally of one side in Syria’s civil war.

While the rebels are receiving arms from Arab states through

Jordan and Turkey, Western powers are concerned that Islamist

militants fighting Assad could also use such weapons against

them. The United States has also held back from supplying arms.

EU diplomats say four or five member states want the EU arms

embargo renewed unaltered, though some of these would accept an

extension of just a month or two to assess how the peace talks

turn out. France has proposed easing the embargo immediately but

making implementation conditional on a breakdown of the talks.

Italy was open to easing the embargo as long as there were

controls on who would receive weapons, one EU diplomat said.

An EU official said compromise may involve proposed arms

shipments being examined case by case or limitations on the type

of weaponry made available, though that may be hard to enforce.

One senior EU official doubted there would any major change

in the arms embargo directly after Monday’s ministerial meeting.

He said: “A prolongation of the current situation for a short

period of time would seem the most likely outcome.”

(Additional reporting by Luke Baker, Ethan Bilby, Ilona

Wissenbach and Francesco Guarascio in Brussels and John Irish in

Paris; Editing by Alastair Macdonald)