As tensions rise in eastern Ukraine and Russia talks ominously of a civil war in which it might have to intervene, observers from Washington to Brussels have started questioning whether sanctions -- the West's current preferred method for dealing with Russia -- can hold the country at bay.
In fact, although sanctions have only a spotty record of achieving political objectives, they could be unusually powerful in this case. Russia's relationship to global financial markets -- integrated, highly leveraged, and opaque -- creates vulnerability, which sanctions could exploit to produce a Russian "Lehman moment": a sharp, rapid deleveraging with major consequences for Russia's ability to trade and invest.
So, even as the West combines lesser sanctions with measures to support economic stability in Ukraine, lessen its long-term dependence on Russian energy, and otherwise signal that there will be costs to further aggression, it should hold the threat of robust financial sanctions in reserve. If Russia does move against Ukraine again, the West will need to hit back hard.
The risks of retaliation should also be taken into account, but they should not be a barrier to action. Arguably, it is the costs of retaliatory sanctions on the West that adds power to its own commitment to sanction Russia.
To date, the sanctions placed on Russia have been limited and largely symbolic. A small number of businesspeople and officials -- and one bank thought to be closely associated with the Kremlin -- have been hit with travel bans and asset freezes. The G-8 has been suspended and replaced with the G-7, which excludes Russia. And trade and financial negotiations between Russia and the West have been put on hold.
The rather muted response reflects worry, particularly in Europe, that deeper sanctions could dampen economic growth and provoke retaliation from Russia. Some in Europe also want to follow a tiered strategy, which preserves off-ramps should Russia decide to step back from the brink and holds out the possibility that tougher measures are in store.