Weekend Economists Pull the Easter Rabbit Out of the Hat April 18-20, 2014

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32. Energy Needs Curb Eastern EU Hunger for Russian Sanctions

http://www.bloomberg.com/news/2014-04-18/putin-gas-splits-eastern-eu-over-russia-sanctions.html

The European Union’s eastern members, once united in their opposition to Soviet rule, are now split over how to respond to Vladimir Putin’s Ukrainian incursion.

In one camp, Polish Prime Minister Donald Tusk and his Baltic allies argue that the EU and NATO need to face up to their historic responsibility and respond to Russian aggression with tougher sanctions. Others argue that such a stance is unrealistic given Europe’s dependence on Russian energy.

At a recent EU summit, conversation turned to energy sanctions, according to a person at the talks. At that point, Hungarian Prime Minister Viktor Orban intervened to say he can’t support a clampdown on Russia when Hungary relies on it for 80 percent of his energy, according to the person, who spoke on condition of anonymity because the debate was private.

The split highlights how Europe’s dependence on Russian energy is hobbling its ability to craft a united response that will deter Putin as he extends Russia’s reach into Ukraine. While the EU targeted individuals in initial rounds of sanctions and is threatening Russia with economic measures, it’s not clear how punitive they will be and will require unanimity to pass.