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Will Putin take the bait during peace talks?

Efforts to establish a peace deal between Russia and Ukraine after weeks of heightened violence are to be stepped up a gear Friday, as European leaders travel to Moscow for crucial peace talks.

German Chancellor Angela Merkel and French President Francois Hollande are to meet with Russian President Vladimir Putin and will attempt to persuade him to agree to a peace plan for Ukraine.

Russia has been battling economic sanctions from the West for almost a year after its incursions into Ukraine; NATO says Russia has sent weapons, funds and troops to the region to assist the separatists' advance.

Russian President Vladimir Putin
Sasha Mordovets | Getty Images

Around 5,000 people have been killed in the conflict so far, according to the United Nations, with another 12,000 or so wounded since the outbreak of violence in mid-April last year.

There has been an uptick in violence between pro-Russian separatists and the Ukraine military over the last few weeks, making the region's instability a top priority for European leaders.

"Together with Angela Merkel we have decided to take a new initiative," Hollande told a news conference Thursday. "We will make a new proposal to solve the conflict which will be based on Ukraine's territorial integrity."

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The meeting on Friday will be Merkel's first trip to Russia since the outbreak of violence in eastern Ukraine began.

Tension rising

It comes as the European Union (EU) considers imposing further sanctions on Russia Monday, if it does not agree to a peace deal. Meanwhile, the U.S. is deciding whether to send arms to Ukraine to help fight the separatists.

Moscow said it would consider any U.S. arms sent to Kiev a security threat, Reuters reported.

With tensions rising between the U.S., EU and its neighbor Russia, whether President Vladimir Putin takes the bait and agrees to some a new peace deal is uncertain, however.

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Timothy Ash, head of emerging markets research at Standard bank, said that both sides were expected to approach the talks with some uncertainty.

"Western nerves over Russian intentions in the region have been strained and trust in Moscow has evaporated in Western capitals over the events of the past year," Ash said in a note Friday.

"Still the mood music from Moscow over the past 24 hours is less bellicose and suggestive that at this particular point in time they want to talk peace again."

But he questioned whether any deal would "stick." "Does Russia have an interest yet in de-escalation, or is this just short term tactics to head off further Western sanctions and the U.S. decision to arm Ukraine?" Ash asked.

Putin in control

Both Ukraine and Russia's economy are in dire straits as the conflict rages on. On Friday, Russia's Prime Minister Dmitry Medvedev said there were "no easy solutions" to Russia's economic problems, Reuters reported, citing the RIA news agency.

Carsten Nickel, senior vice president of Teneo Intelligence, said that the latest negotiation initiative by Merkel and Hollande was "unlikely to provide a quick solution for the ongoing conflict in eastern Ukraine."

"Putin is unlikely to have a major interest in calming down the crisis at this point. More likely, in accepting talks, the Russian leader might see a chance of adding to an emerging transatlantic rift over the issue of arms supplies to Kiev," Nickel said in a note Friday.

Russia was likely to bide its time, he added.

"Moscow will likely want the separatists to secure sites that would guarantee the sustainability of their territorial control in the situation of a frozen conflict; and – at the same time – an area large and economically powerful enough to claim a strong say in Ukrainian domestic politics if any negotiated solution were ever to emerge," he said.

"The underlying Russian rationale remains the same: Moscow wants to prevent Ukraine's membership in NATO and EU."

Read MoreUkraine crisis'turning point' close: Russian Deputy PM

Russia's economy has been hit hard by the severe decline in global oil prices and Western sanctions. This, in turn, has caused the ruble to weaken dramatically, pushing up the rate of inflation. Similarly, Ukraine's currency, the hryvnia, has also weakened substantially and, like Russia, its central bank has hiked interest rates in an effort to stop the rout.

Over the last six months, the hryvnia has fallen around 97 percent against the dollar; the Russian ruble, by contrast, has fallen around 46 percent against the dollar in the same period.

- By CNBC's Holly Ellyatt, follow her on Twitter . Follow us on Twitter: @CNBCWorld