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Trade through Lithuania to the Russian exclave of Kaliningrad could return to normal within days as officials edge towards a compromise deal, two sources familiar with the matter told Reuters.

Kaliningrad, which is bordered by EU states and relies on railways and roads through Lithuania for most goods, has been cut off from some freight transport from mainland Russia since 17 June under sanctions imposed by Brussels.

European officials are in talks about exempting the territory from sanctions, paving the way for a deal in early July if EU member Lithuania drops its reservations, said the people, who declined to be named because the discussions are private.

It is proving hard for Europe both to stand by strict sanctions and avoid further escalation with Russia so European officials, with the backing of Germany, are seeking a compromise to resolve one of their many conflicts with Moscow, said one of the people.

© Provided by The Guardian A view shows freight cars, following Lithuania’s ban of the transit of goods under EU sanctions through the Russian exclave of Kaliningrad. Photograph: Vitaly Nevar/Reuters

If the traditional route for Russian goods to Kaliningrad, first via its ally Belarus and then Lithuania, is not restored, the Baltic state fears Moscow could use military force to plough a land corridor through its territory, the person said.

Germany, meanwhile, has soldiers stationed in Lithuania and could be sucked into a confrontation alongside its Nato allies if that were to happen.

Europe’s biggest economy is also heavily reliant on Russian gas imports and would be vulnerable to any reduction in flows if the Kaliningrad dispute escalated.

“We have to face reality,” said one person with direct knowledge of the EU discussions, describing Kaliningrad as “sacred” for Moscow.

“[Putin] has much more leverage than we have. It’s in our interests to find a compromise,” he said, conceding that the eventual outcome may appear unfair.

One of the people with direct knowledge of the matter said they expected a compromise deal would be found by 10 July and a second person said it could be announced next week.