The economic levers that might stop Putin

But this is 2014, and circumstances have changed. Through persistent and effective diversification, Ukraine has reduced its Russian gas imports by more than 10%, while the EU has weaned itself by over 20%. Unlike the dead-of-winter 2009 gas cutoff, this crisis is occurring with spring around the corner. Ukraine and EU countries reportedly have stockpiled some gas supplies to reach the warmer months.

Likewise, Russia is not in the position of economic strength that it was during its previous aggressive encounters with Ukraine and Georgia. A month ago, before the crisis, Russia had to cancel its domestic bond auction two weeks in a row due to poor market conditions. On Monday, the ruble hit an all-time low as financial markets were spooked by the mounting trouble in Ukraine.

Yet the markets are even more concerned about Ukraine’s economic instability than Russia’s. Ukraine is suffering from dwindling foreign-exchange reserves and could be on the precipice of a sovereign default, or at least a restructuring, without a sufficiently robust multilateral-assistance package.

This risk, however, is also an opportunity. If the U.S. and the EU coordinate an economic-assistance package of roughly $20 billion, Ukraine’s economy can likely be stabilized. Urgency may impede our ability to extract the full range of preferred conditions from Ukraine. Even so, certain key structural economic reforms, such as reducing domestic gas subsidies, and ensuring free and fair elections in May using international monitors, should be obtainable.