Ukrainian forces are gaining ground in the country's east, but Russia’s military interference shows no sign of slackening. This is a dangerous moment. Fortunately, diplomacy to alleviate the crisis is intensifying, but negotiation will need to be matched by firmness. It remains unclear whether a political settlement will be possible.

Despite uncertainty about Russian military plans and the outcome of Ukrainian military operations against the rebels in their remaining redoubts, it is not too soon to consider how to lay the foundations for a negotiated solution.

On Saturday, German chancellor Angela Merkel will visit Kyiv, and next Tuesday, European Commission leaders will meet in Minsk with Russian president Vladimir Putin and Ukrainian president Petro Poroshenko. These contacts offer opportunities to assess whether the conflict can move from the battlefield to the negotiating table.

There have been a number of telephone calls between Russian, Ukrainian and Western leaders—over thirty between Merkel and Putin—but formal negotiations on defusing the crisis are stalled. On July 2, in Berlin, the foreign ministers of France, Germany, Russia and Ukraine met and agreed to create a contact group comprising the Organization for Security and Cooperation in Europe (OSCE), Russia and Ukraine. Germany’s Frank-Walter Steinmeier gushed that the meeting yielded “a clear commitment to a multilateral ceasefire.” On August 17, at a second meeting of the ministers, he highlighted the ministers’ efforts to devise a “roadmap toward a sustainable cease-fire.” But Russian foreign minister Sergey Lavrov said he saw no “positive results” to this end or progress on a “political process” for resolving the conflict.

In addition to a lack of good-faith participation by Russia, the negotiations have three structural weaknesses: the exclusion of key actors, the narrow scope of the talks and the illogic of pursuing a cease-fire. Talks ought to include the European Union, the United States and Canada. This would bring more leverage to bear in areas beyond the crisis, such as energy and economic assistance. It would also reduce pressure on Ukraine to accept a cease-fire in place, which would create a frozen conflict and permanent instability, as in Abkhazia, Transnistria and Nagorno-Karabakh. Ukraine has to be able to restore its territorial integrity.

Energy and access to international capital markets offer leverage to help attain a negotiated peace. Russia faces huge financial problems in maintaining and expanding energy production. Technology from the Western oil majors is vital to the exploitation of deep-water fields in the Arctic and to keeping old fields productive. In the wake of U.S. sanctions, Rosneft is now asking its government for over $40 billion in aid. A fourth challenge for Russia is obtaining financing for new production in the Arctic and construction of LNG export facilities. If Russia were to cut its gas shipments to Europe—a key income source—it could not come close to making up this revenue through other sales. If oil prices continue to fall, Russia will become even more eager to sustain European gas revenues.

In looking to negotiations to end the crisis in Ukraine, the West should first make clear what steps NATO and the EU will undertake to support Ukraine and, if required, how sanctions on Russia will be intensified if it is unwilling to reach a fair settlement. Without this clarity, Putin may be reluctant to accept that the endgame has begun. At the same time, the West ought to weigh Russian interests and sensitivities that it can accommodate if the Kremlin is willing to reach a settlement.

In pursuing a negotiated solution, the parties might consider several possible elements:

- Russia would pledge not to send arms or regular or irregular forces into Ukraine, and would immediately withdraw its arms and forces now deployed there. To help verify this commitment, OSCE observers should augment Ukrainian border guards in monitoring the Ukrainian-Russian border to detect any flows of personnel or arms. Western states should provide Ukraine with more technical support and information to help it monitor and control the border.

- Ukraine would accept an OSCE mission on its territory and agree to work with the OSCE High Commissioner on National Minorities. The OSCE could verify the preparation and conduct of free elections in eastern Ukraine, investigate suspected violations of human and minority rights, encourage negotiations on confidence-building measures, and undertake programs to strengthen the rule of law.

- The parties to the 1994 Budapest Memorandum—Russia, the United Kingdom and the United States—would recommit to their obligations. Concluded as part of a deal to facilitate Ukraine’s accession to the Treaty on the Non-Proliferation of Nuclear Weapons, the Memorandum provides political assurances against threats or the use of force against the territorial integrity or political independence of Ukraine, as well as Belarus and Kazakhstan. To increase the credibility of the assurances, the parties ought to establish an implementation commission, akin to similar bodies for some international arms-control accords.

- Even though Crimea is part of sovereign Ukraine, Kyiv would pledge to use only political, economic and international legal mechanisms to regain control. The United Nations and the OSCE should oversee a negotiating forum with Russian, Ukrainian and Western participation. Kyiv could pursue reparations if Russia continued to deprive Ukraine of income and assets that would otherwise accrue to it.

- Ukraine would pay no more for Russian gas than do most favored customers in Europe. For gas exports through Ukraine, Russia would pay a transit fee in line with fees elsewhere in Europe. The EU could guarantee the security of Russian gas shipments through Ukraine to points west. EU observers, perhaps in coordination with the International Energy Agency, would need access to the Ukrainian pipeline system for monitoring. The EU guarantee might help Russia restore its earlier reputation as a reliable gas supplier to Europe, and Ukraine restore its role as a reliable transit country.

- The West would agree not to impede, through the World Trade Organization, the operation of the Russian-favored Eurasian Economic Union, as long as it did not contravene WTO obligations assumed by Russia and by any future WTO members that belonged to the Union. The West would continue to oppose any Russian intimidation of neighbors to join.

In the context of an overall political settlement, the West would lift sanctions imposed in response to Russia’s aggression in eastern Ukraine, although not sanctions levied in response to the seizure of Crimea. Russia would end its bans on the import of many Western agricultural products. Ukraine would be free to affiliate with the EU in any mutually agreed manner.

This formula does not redress the illegal occupation and annexation of Crimea by Russia. Because it sees a vital interest in the Black Sea Fleet based there, and because Ukraine would remain unstable and impoverished if the conflict in eastern Ukraine persisted, the urgent priority should be to end the fighting. The West should not recognize the legitimacy of Russia’s annexation of Crimea, and ought to sanction any international energy company that operates in Crimea or its related exclusive economic zone.

If the Kremlin were unwilling to reach a fair negotiated settlement, the West should take steps to increase its bargaining leverage in two main ways:

First, increasing numbers of political voices in the West are calling for supplying Ukraine with significant defensive weaponry. We agree. The West has hesitated to take this step, but a prolonged Russian-backed rebellion in eastern Ukraine would erode reluctance.

Second, the West ought to provide much more economic assistance to Ukraine, especially to help rebuild areas in the east devastated by fighting. Prime Minister Arseniy Yatseniuk has estimated that restoring infrastructure alone could cost billions of dollars. International aid must continue to be conditioned on implementation of Ukraine’s IMF reform program, which slashes wasteful subsidies. The Council of Europe could help Ukraine develop a new constitution and establish more effective regional and local government.

In conclusion, Western leaders should not shrink from employing all of their available tools to increase the incentive to Moscow to pursue a negotiated settlement. Chancellor Merkel’s initiative in finding a solution to the Ukrainian crisis is very welcome. She and other EU leaders ought to be out in front in resolving it. America should focus on strengthening NATO’s capacity to defend its members and deter Russian aggression. The United States can also contribute over the long term by helping European allies and Ukraine enhance their energy security, in particular by increasing exports of U.S. liquefied natural gas.

Ian Bond, director of foreign policy at the Centre for European Reform, was British ambassador to Latvia.

Denis Corboy, visiting senior research fellow at King's College London, was European Union ambassador to Armenia and Georgia.

William Courtney, adjunct senior fellow at the RAND Corporation, was U.S. ambassador to Georgia and Kazakhstan.

John Herbst, director of the Eurasia Center at the Atlantic Council, was U.S. ambassador to Ukraine and Uzbekistan.

Richard Kauzlarich, nonresident senior fellow at The Brookings Institution, was U.S. ambassador to Azerbaijan and Bosnia and Herzegovina.

William Taylor, vice president for the Middle East and Africa at the U.S. Institute of Peace, was U.S. ambassador to Ukraine.