Why the West won’t hit Russia with more sanctions

March 20, 2014, 10:12 PM UTC

FORTUNE — Vladimir Putin’s approval ratings may be soaring, but you can’t say the same thing for the Russian stock market or the ruble.

Investors have been pulling their money out of Russian investments, fearing that the country’s annexation of Crimea could lead to harsh economic sanctions from western nations. Not only that, it’s increasingly clear that Russia’s move will be a drag on its own economy — as the region has little to offer but a naval base and a relatively warm climate. In other words, the loss of Crimea isn’t a huge one for the Ukraine or the West, and that’s just one of several reasons why we shouldn’t expect the the U.S. and Europe to respond with economic sanctions that will significantly restrict trade or capital flows, despite tough talk from President Obama and European leaders. Here are three others:

1. The annexation of Crimea actually puts the West in a stronger position to consolidate its influence over the rest of Ukraine. Western attempts to draw the Ukraine closer to the EU and the United States triggered this crisis. According to Mujtaba Rahman, an analyst and European Practice Head at the Eurasia Group, the fact that the European Union and the new Ukrainian government have now, in response to Russia’s annexation, moved forward with an association agreement — which serves as a road map for Ukraine’s eventual joining of the European Union — is a much bolder and consequential step than any economic sanctions would be.

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“When you take a step back, this whole drama was about whether or not Ukraine is going to become an EU member, and whether or not Moscow is willing to let it turn West, and Europe has now made it clear that it’s going to allow this to happen.” And with the Crimea region now a part of Russia rather than the EU, Russia’s influence over the Ukraine has been greatly weakened. Nearly 1 million pro-Russian votes in Crimea that could have been used to influence Ukrainian politics going forward are gone, argues Rahman. “It’s now a lot easier for this Western-friendly government in Kiev to get a Western-friendly president in place.”

2. Strong sanctions would end up hurting the West as much as Russia. As the Latvian-based economist Andris Strazds has pointed out, the Russian economy is heavily dependent on oil exports to Europe. While this fact might lead you to believe that Europe has leverage over Russia, this road goes both ways. Strazds writes:

An embargo on oil exports from Russia would result in a huge increase in oil prices, at least temporarily. In addition, several EU countries are heavily dependent on Russia for natural gas. Beyond energy, German and many other European Union businesses trade extensively with Russia, and they would be harmed by sanctions. In addition to trade, there are also extensive investments between EU and Russian firms that would be adversely affected.

The U.S. and the EU have political levers to influence Russia, so it’s doubtful they’ll resort to mutually painful economic sanctions in order to achieve their goals.

3. Sanctions tend to not work, anyway. What would the West get in return for a concerted effort to harm its own economy? Probably nothing. Economic sanctions don’t usually deliver their intended effect, and they can often be counterproductive. University of Chicago political scientist Robert Pape studied the effects of economic sanctions from 1914-1990 and found only five examples in 115 attempts in which such sanctions achieved their goals. In fact, in many of these cases, sanctions led the populations of effected nations to rally around their leaders and further support the actions that paved the way to sanctions in the first place.

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Of course, all of this could change if Russia decides to make further incursions into Ukrainian territory. “Nobody wants to get into a serious fight, economic or otherwise, over Crimea,” says Rahman. But if this is just the first step in Putin’s plan to expand Russia’s military influence in Europe, the West will consider responding with real economic — and perhaps military — force.