LONDON » Britain and the European Union made a "catastrophic misreading" of Russia and President Vladimir Putin and "sleepwalked" into the Ukraine crisis, treating it as a trade issue rather than as a delicate foreign-policy challenge, British lawmakers said Friday in a scathing report.

For too long, the European Union’s relationship with Moscow had been predicated on the "optimistic premise" that Russia was becoming a democratic, law-abiding country, the report said, rendering member nations insensitive to the degree of Russian hostility toward EU efforts to negotiate a closer political and economic relationship, known as an "association agreement," with Ukraine.

European states "have been slow to reappraise the relationship and to adapt to the realities of the Russia we have today," the report said, and lack a long-term strategic response.

The analytical failure and "glaring absence of political oversight" was compounded by a decline in Russia expertise and analysis in Britain and across the European Union, the report said.

"A loss of collective analytical capacity has weakened member states’ ability to read the political shifts in Russia and to offer an authoritative response," it said.

The report concluded that the European Union had failed to appreciate "the exceptional nature" of Ukraine and its relationship to a more aggressive Russia in Putin’s latest term as president.

Britain failed to live up to its obligations in the 1994 Budapest Memorandum, which it signed with Russia, the United States and Ukraine, guaranteeing Ukraine’s territorial integrity and offering security "assurances" in return for Kiev’s renouncing its extensive nuclear arsenal, the report said. "The U.K. had a particular responsibility towards the country, and it has not been as active or as visible as it could have been," it said.

While the policy of the United States was not a direct topic for the report, the same criticism was implicit. Andrew Wood, a former British ambassador to Russia, said that the "misreading" of Ukraine applied to the United States as well as to Europe.

The report was prepared over nine months by the EU external affairs subcommittee of the House of Lords and overseen by Christopher Tugendhat, a former member of the European Commission.

The report sharply criticizes Russia and the pro-Russian separatists in eastern Ukraine, and it recommends further Western economic sanctions in response to the fighting, which has continued despite another cease-fire. Further European sanctions should follow Washington’s practice of targeting those close to Putin as opposed to middle-ranking officials in Crimea, the report said, and the European Union should consider extending sanctions into the Russian financial sector. Britain, it said, should stage an international donor conference in London for Ukraine.

A Foreign Office official said that no one could have predicted the Russian intervention in eastern Ukraine. "The blame lies squarely with the pro-Russian separatists, backed by Russian authorities, not with an association agreement between the EU and Ukraine which had been under negotiation for more than seven years," she said, speaking on the condition of anonymity, as is Foreign Office practice.

It was about a year ago that demonstrations in support of closer ties to the European Union culminated in the revolution in Kiev that led to the flight to Russia of the Ukrainian president, Viktor Yanukovych. That was soon followed by the seizure of Crimea by Russian forces and a separatist push in eastern Ukraine.

Prime Minister David Cameron of Britain, occupied by the election campaign before a vote on May 7, has been criticized as a bystander in the Ukraine crisis and did not go to Minsk, Belarus, last week for talks with Putin, President Petro Poroshenko of Ukraine, Chancellor Angela Merkel of Germany and President Frangois Hollande of France.

Britain has said that it does not approve of providing defensive arms to Ukraine now, a position repeated Thursday in Madrid by the foreign secretary, Philip Hammond. Tugendhat said Friday that because the West would not fight in Ukraine, it must not raise false hopes there. "They do need to get on with the Russians themselves," he said.

But the defense secretary, Michael Fallon, warned this week that Putin presented "a real and present danger" to the three Baltic nations and thus to NATO itself. He said Russia was now "as much a threat to Europe as Islamic State," and spoke as British fighter jets were scrambled for the second time in a month to escort Russian bombers off the coast of Cornwall, England.

Despite the stronger tone, Britain has been sharply reducing its military budget, with more cuts expected in the next Parliament, prompting warnings about Britain’s ability to play a serious role in global affairs.

This month, the Defense Select Committee of the House of Commons sharply criticized Britain for playing a "strikingly modest" role in the coalition battle against the Islamic State, noting that Britain had carried out only 6 percent of coalition airstrikes. The committee, led by Rory Stewart, a member of Parliament from Cameron’s Conservative Party, criticized the prime minister and the armed forces for failing "to set out a clear military strategy" for Britain and neglecting to use accumulated British knowledge about Iraq despite "the most significant threat" to international stability to emerge from the Middle East in decades.

The committee found that Britain had only three military personnel outside the Kurdish region of Iraq compared with 400 Australians, 280 Italians and 300 Spaniards.

A projection by the Institute for Fiscal Studies from the government’s fall budget statement says that military spending could be cut further by 36 percent in real terms in the next Parliament, which will be elected on May 7.

Steven Erlanger, New York Times