Mario Draghi has warned that, though unlikely, Europe’s fledgling economic recovery could be derailed by the turmoil in Ukraine.
While the direct financial and trade linkages between the European Union and Ukraine are small, the ECB president told lawmakers in Brussels yesterday that the geopolitical dimensions of the tensions could have a strength that goes beyond mere statistics on capital and current accounts.
One of the most important economic aspects of those geopolitical dimensions is the supply of Russian gas to the EU.
The EU’s reliance on Russia has dwindled over the past decade, but it still matters. The relationship still accounts for 30 per cent of all gas imported into the bloc and when Gazprom cut off Ukraine in 2009, the disruption to energy supplies hit the EU hard. And though the EU is now less reliant on receiving its gas via this route, there’s no way of Russia using the gas button against the Ukraine without it having some impact on the rest of Europe.
The popularity of this tweet by Reuters’ Jamie McGeever highlights the interest this geopolitical dimension has received:
Europe's dependency on Gazprom for its gas. It's pretty high: pic.twitter.com/VvXLZYzNx8
— Jamie McGeever (@ReutersJamie) March 4, 2014
But there are good reasons to bet against Russia turning off the gas tap, regardless of whether or not one believes relations with the EU are the direst since the Cold War. Read more