Russia and the European Union: Joined at the hip
The 28-member European Union's (EU) gross domestic product (GDP) is essentially equal to that of the United States - about $17 trillion. The European Union is the world's second largest energy consumer, using about 75 percent as much as the United States. However, the EU harbors only about 2 percent of the globe's proven crude oil resources and just 4 percent of its conventional natural gas.
The EU imports more than 50 percent of its annual energy requirements. About one-fourth of its combined oil and gas supplies come from Russia - including 40 percent of its natural gas. While the EU's easternmost countries (e.g. Poland, Finland, Bulgaria, the Baltic States) are most vulnerable to Russian mischief, strong economies are at risk too. Germany, the world's fourth largest economy, depends on Russia for one-third of its natural gas needs.
Russia has a recent history of using energy as a big stick. In 2008, it threatened to cut off gas exports to the Czech Republic when the Prague government agreed to base a U.S. missile defense system on Czech soil (the Czechs subsequently bowed to Russian demands). In 2008 and 2009, Russia cut off natural gas deliveries to Ukraine over prices and alleged Ukrainian corruption.
But, an energy shutdown to Western Europe is clearly not in Russia's best interest. Oil and natural gas sales are Russia's cash cow. (Russia's $2 trillion+ GDP ranks eighth, behind Brazil and ahead of Italy.) According to the U.S. Energy Information Administration (EIA), those exports account for more than 50 percent of the country's federal budget. The EU buys almost 80 percent of Russia's oil exports and more than 60 percent of its natural gas. Using energy to hold Europe hostage could be a bad idea.
