Investors are punishing many former Soviet bloc nations for their ties to Russia even as these countries, now European Union members, support sanctions on President Vladimir Putinfor his actions in Ukraine.

After the ruble, currencies from eastern Europe accounted for five of the six worst-performing emerging-market exchange rates in July, led byHungary’s forint and Romania’s leu. Stock indexes in Bulgaria, the Czech Republic and Hungary joined Russia’s among the 10 biggest declining markets in the world this month. Gedeon Richter Nyrt., Hungary’s biggest drugmaker, plunged to a three-month low today after revising down its sales outlook because of the escalating crisis over Ukraine.

All but one of the 11 former Communist countries now part of the EU condemned Putin’s land grab of the Crimea earlier this year. They walk a tightrope by aligning themselves politically with western Europe while maintaining economic links to Russia. More than half the energy supplies consumed by east European countries comes from Russia, according to Deutsche Bank AG. The 28 EU nations voted unanimously to extend sanctions on Russia this week as a penalty for what they see as Putin’s destabilizing role in Ukraine, even as the trade restrictions also harm them.

“There’s a sense by global investors of why mess around with central and eastern Europe and the geopolitical risks if there are other opportunities out there,” said Ilan Solot, a foreign-exchange strategist at Brown Brothers Harriman in London.

David Fuller's view

Markets are unsentimental.  Many global investors will avoid placing more capital in eastern and central Europe until either the situation with Russia improves or valuations are sufficiently low that it is worth overlooking the current risks and uncertainties.