Russian President Vladimir Putin has moved to escalate tensions with Ukraine in recent months by placing a huge and unprecedented Russian military force on its borders while launching a concerted “coercive” diplomatic effort sketching new red lines for the NATO.

Although his next steps are uncertain, some still believe he will eventually fizzle out. However, it is far from clear whether he can do so without losing face if, as seems likely, NATO and Ukraine give in to very few of his demands. This will figure prominently in his decision-making process from now on.

So far, Putin has achieved a number of victories in the current crisis.

It has caught the attention of the Biden administration and the West in general. Biden rewarded him with a summit call in late December, while there were also high-level meetings between Blinken and Lavrov and their deputies.

It’s important to remember here that figures like US National Security Advisor Jake Sullivan had previously persuaded Biden to look to Asia and focus on the three Cs: Covid, climate and China. Instead, this year it was all about Russia. Putin has made it clear that he is not just a footnote in American foreign policy, but remains the first chapter and possibly an entire book to be written later this year.

Putin has enhanced his image as a decider and a poker player with all the cards. More than ever, he is seen as a leader that everyone has to deal with if they want solutions to the geopolitical problems that he himself creates.

It also forced NATO to focus on security challenges in Europe. By setting outrageous red lines in terms of non-deployment from NATO to members who joined after 1997, he made people question further enlargement, particularly to Ukraine.

By creating a crisis in Eastern Europe, Putin succeeded in exposing the weakness and divisions of the West, both within the EU and in terms of Europe’s relationship with the United States. Note here Emmanuel Macron’s whimsical idea that Europe can decide its own security arrangements. How does the French president hope to defend Europe against the overwhelming conventional military superiority of Moscow without American troops?

Germany’s role was also challenged by the tribulations on NS2 as well as Berlin’s incredible double standards in not supplying defensive weapons to Ukraine and preventing others from doing so.

Meanwhile, energy prices have been pushed higher by the current geopolitical crisis, helping to improve Russia’s record. That said, this could have been achieved without military escalation and simply limiting Europe’s energy supply, which also appears to have been done according to IEA chief Fatih Birol.

The crisis has allowed Putin to shine a light on Russia’s significant military capability around the world and demonstrate his willingness to use it in support of “coercive” diplomacy. The buildup along the border with Ukraine served as a showcase for the huge upgrade achieved through investments made in the Russian military over the past decade. However, this awesome vision of military power has yet to pass the ultimate test of effectiveness in action and could still be a Potemkin village.

These are all obvious victories for Putin, even if he chooses not to go any further. But what about the other side of the ledger?

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If the Russian leader does not take some form of military action in the coming weeks, his bluff will have been called. Critics will inevitably say that while he was able to move thousands of troops to the border and make threats, he lacked the courage to pull the trigger. He had the chance to take Ukraine and he bottled it up, they will say. As a result, any future attempts to threaten major escalation may not be taken seriously.

By backing down from a military escalation, Putin would risk being accused of failing to obtain serious concessions on Ukraine or from NATO. He would be seen as a man who talks a lot and threatens but, when faced with a harsh response from the other side, eventually backs down.

While exposing divisions in the West, Putin’s coercive diplomacy has also shown him to be the main threat to European security. Even in Germany and France, the public relations campaign has been lost by Putin and public opinion is turning against him. The West unites around the idea that Putin is a problem and that it must be countered.

This crisis and the pressures on energy markets in Europe will reinforce the idea that Russia is an unreliable energy supplier. Regardless of the ongoing debate over the Nord Stream 2 gas pipeline, this will accelerate Europe’s diversification away from Russian energy and Russian trade in general, weakening the Russian economy and increasing its dependence on China. . That might not be particularly appealing to Putin, as Russia faces a huge long-term security threat from China in its Far East.

Above all, Ukraine did not give in to pressure from the Kremlin. Instead, Putin’s military buildup and the threat of a full-scale invasion cemented opposition to Russia in the country. Ukrainians have gathered in large numbers to join self-defense units, while the West has come out clearly in favor of Ukrainian sovereignty and the country’s right to self-determination.

Ukraine is currently being rearmed at an accelerated pace, although this is one of Russia’s main concerns. Ukraine is much better able to defend itself today than when the crisis began just a few months ago. US military aid has increased while Britain, the Baltic states, Poland, Canada, the Czechs and the Dutch have all stepped up military support or pledged to do so. As a result, the cost of any Russian military victory in Ukraine is now likely to be considerably higher.

Putin is already paying the price for the current confrontation, which further damages Russia’s image as an investment destination. Geopolitical and sanctions risks have increased. Fewer foreign investors will want to invest in Russia and those already there will reduce their exposure.

This means a higher cost of capital and lower growth. It also means lower living standards for Russians and an increased risk of Kazakh-style social unrest. Putin will likely respond with more repression. Russia risks becoming trapped in a vicious cycle of lower foreign investment, weaker growth and lower living standards.

Given the many negative outcomes Putin is currently facing, I would argue that he risks emerging from the current crisis as a net loser unless he goes further. Does he see it the same way? If so, will it get worse from here? At this point, he may feel like he has little choice.

Timothy Ash is Senior Sovereign Strategist at Bluebay Asset Management in London.

Further reading

The opinions expressed in UkraineAlert are solely those of the authors and do not necessarily reflect the opinions of the Atlantic Council, its staff or its supporters.

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Image: Russian President Vladimir Putin attends a meeting with Moscow Mayor Sergei Sobyanin at the Kremlin. January 20, 2022. (Sputnik/Mikhail Metzel/Pool via REUTERS)