The European Union is suspending part of its financial assistance to Russia in a sign of concern over Moscow's continued military campaign in Chechnya.

EU foreign ministers decided to cut short aid programmes to Russia worth $130m this year.

Projects estimated at $90m will be suspended or refocused on humanitarian needs and only those aimed at nuclear safety and support for human rights and democracy will continue.

The EU is also freezing talks on extending trade preferences to Russia, with a cost to Moscow of some $60m.

But there was no discussion on lifting Russia's Most-Favoured Nation status in its trade relations with the EU, as Moscow seemed to fear.

'Totally unacceptable'

The debate was so sensitive that the ministers went into a restricted session with only a handful of officials present.

Last December, at their summit in Helsinki, EU leaders used stronger language, condemning the intense bombardments of Chechen cities as totally unacceptable.

Some of the measures they called for then have now been implemented but after Boris Yeltsin's surprise resignation on New Year's Eve and the arrival of Vladimir Putin as the new leader in the Kremlin, the mood has turned more cautious.

EU foreign ministers welcomed the smooth transition of power in the Kremlin and stressed they were open to dialogue with Russia on long-term relations as well as on matters of concern such as Chechnya.

The German Foreign Minister, Joschka Fischer, just back from a trip to Moscow, said: "We have to be realistic - politics is the art of the possible not the desirable".