Will Europe Pass Serious Sanctions?

Bloomberg View’s editors urge them to:

There is no guarantee that sanctions of any kind will get Putin to back down over Ukraine. But the EU needs to demonstrate that it cares enough and is united enough to stop him — even at some cost to their own interests — if he is to be deterred from further adventures in Ukraine or beyond.

Amen. Vinik doubts, however, that EU sanctions will have teeth:

U.S. sanctions will only act as a deterrent if Europe credibly threatens to impose sweeping sanctions on the Kremlin. If banks don’t believe that the E.U. would ever sanction Rosneft, then they won’t worry about extending euro-denominated loans to it, no matter what the U.S. does. It’s hard to see how Europe can make a credible threat, given the mutually assured economic destruction that would result.

 For that reason, financial markets have not reacted negatively to Thursday’s events. The S&P 500 and Dow Jones index are both up around a percent Friday.

“If what we’re observing is all that we get, then I think the economy fallout on the U.S. is very small,” said Mark Zandi, the chief economist at Moody’s. “I don’t think it’s significant. It’s showing up in a bit higher oil prices. Stock prices are down. This is very, very marginal in the grand scheme of things.”

Yglesias observes that one “quirk of the situation is that the European Union voted for tougher sanctions on Russia on Wednesday, less than 36 hours before the destruction of MH17″:

That included suspension of billions of dollars in loans to Russian public sector projects and potential asset freezes on wealthy Russians who are financing separatist groups in Ukraine. Had these new sanctions not been already agreed to, this menu of options likely would have been the first wave of EU response to a new Russian provocation. But since these measures were already in the works, Europe has already plucked its lowest-hanging fruit and will need to think of some new ideas if more conclusive evidence forces European leaders to deliver consequences.

Meanwhile, Putin passed some toothless sanctions of his own last week:

Moscow knows the new sanctions on Abu Ghraib and Guantanamo officials won’t have much practical effect. But the fact the measures were made public shows that Putin is trying to bolster his argument that the U.S., rather than Russia, is the country that’s egregiously violating human rights and international law.