The U.S. and Europe have threatened to impose sanctions on Russia following its incursion into Ukraine—but the West's economic ties with Moscow will make it hard to isolate the government of President Vladimir Putin, reports wsj.com.

Why will sanctions be difficult to impose?

Although President Barack Obama and Secretary of State John Kerry talked tough Tuesday in denouncing Russia's occupation of the Crimean peninsula over the weekend, it is Europe that is right next door. While U.S. trade with and investment in Russia are considered small, Europe's ties to Russia run much deeper. And while the Continent's leaders may take a dim view of Russia's foray into Ukraine, they are probably more willing for diplomatic measures to be exhausted before considering sanctions.

What are the stakes?

As Russia's economy has grown in the post-Soviet era, its trade with Europe has exploded. In the first nine months of 2013, the European Union imported €156 billion ($214 billion) from Russia, most of it in oil and gas. Any reduction or halt of Russian energy assets heading West will only add to Europe's already-high energy costs. In the same period, the EU exported over €90 billion of goods to Russia, making it the EU's fourth-largest market. Several big European banks have substantial operation in Russia, and could be wary of damage to their foothold in the country.

What will happen next?

While the Obama administration and Congress push forward with legislation imposing sanctions on Russia, and as the EU prepares an assistance package for Ukraine, Mr. Putin remains defiant. He cautioned Tuesday against the imposition of sanctions, saying there would be "consequences" for all sides. Despite his bravado, Russia's economic problems and a weakened currency leave it open to pressure from the West. Without a reversal of course in Ukraine, limited economic sanctions against Russia appear the most likely result.
861 reads | 06.03.2014

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