The Dish

Will Europe Pass Serious Sanctions? Ctd

The Bloomberg editors condemn European states for dithering over Russian sanctions:

It’s true that sanctions alone may not persuade Putin to end his support of separatists in Ukraine. But there’s a chance they might — and even if they don’t, they’re still worthwhile. One thing sanctions can do — and there is some evidence they are hurting Russia’s economy already — is deter future behavior. If Putin has unleashed a nationalist hunger to restore Russian dominance that he has lost either the will or the ability to control, all the more reason to cut off the arms and money that fuel further adventures, in Ukraine or elsewhere.

Steve LeVine suggests targeting Gazprom could be effective:

Some analysts think that Putin is awaiting a sign of greater Western toughness in reaction to the crash of Malaysia Airlines 17 before deciding what he does next in Ukraine. “If Europe is only going to wag its finger—if he can get away with this kind of crisis—he will be encouraged to destabilize Ukraine even more,” Itzhak Brudny, a professor at the Hebrew University of Jerusalem, told Quartz. Targeting Gazprom—or even hinting that such a move is on the table—could be the best way to display that toughness.

Danny Vinik demonstrates Russia’s reliance on energy exports with the above chart:

This is a double-edged sword: The dependence gives the world significant leverage to inflict economic damage on the Kremlin, but Europe’s reliance on Russian energy exports puts their economies at risk if they follow through on that threat.

Consider: In 2013, the United States exported more than $1.5 trillion of goods. Of those, just $137 billion were either crude oil or petroleum products. (Due to the Energy Department’s slow approval process, the U.S. has a de facto ban on natural gas exports.) In Russia, on the other hand, the export of crude oil, petroleum products, and natural gas made up more than two-thirds of their total exports … Oil and gas revenues make up more than 50 percent of the Russian government’s total revenue, most of it coming from Europe. If the Eurozone nations decided to reduce or end their purchases of Russian oil and natural gas, it would leave a massive hole in the nation’s budget.

Mark Whitehouse observes that “Europe’s economic ties to Russia are much stronger than they were when Putin came to power”:

Back in February 1999, soon after he took over from former President Boris Yeltsin, Russia’s share of German exports and imports was less than half what it is today. Apparently, building new pipelines to Europe has served Russia’s geopolitical interests well.

Jason Karaian finds that European public opinion is turning against Russia:

After the downing of a Malaysia Airlines plane in eastern Ukraine, more than half of Germans polled now support trade sanctions against Russia. This is a big jump from a similar survey in March, just after Russia’s annexation of Crimea … Support for sanctions rose even more in the UK over the same period, which will encourage prime minister David Cameron to keep up the tough talk against Russia, including picking fights with allies he deems less committed to the cause. But the British public is less keen on freezing financial assets than imposing trade embargoes, perhaps reflecting how much Russian cash currently flows through London’s financial center.

Earlier Dish on possible EU sanctions here.