Countries that are full members of the European Broadcasting Union (there are 56) can enter the song contest as long as they pay the appropriate fee and broadcast the previous year's contest. It's the membership of the EBU that determines the entry not the location of the country.
Corbyloon is quite correct - the criteria is based on countries who receive the EBU broadcasts, and is nothing to do with geography - which is why countries such as istrael and Russia are eligible to enter.
I heard a feature on Radio Four about the voting for Eurovision.
It is less a matter of 'politics', than the simple mass migration of ethnic populations, especially in the Eastern Bloc countires, where up to thirty per cent of a population can be madew up of migrants, who will naturally vote for their mother country.
What ever the reason, it looks like the UK's chances of ever getting near a win are long gone.