As Russia threatens war in Ukraine, the strength of the West’s response is up for debate

After a Putin-induced dip yesterday, the markets seem to be recovering a little this morning. The Shanghai Composite rose by 0.9% and the Hang Seng by 0.6%, the Stoxx Europe 600 is up 0.7% at the time of publication, and U.S. futures look comparable, which is nice as the S&P 500 entered correction territory yesterday. Oil futures are down a little, as are U.S. natural gas futures (though European gas futures, which surged nearly 10% yesterday, started the day with another jump of around 5%).

It scarcely needs saying that this relative tranquility does not mean all is well in Ukraine. Vladimir Putin, who has now received Russian lawmakers’ approval for the foreign use of force, has also decided that Russia’s recognition of the so-called Donetsk and Luhansk People’s Republics extends to the borders proposed by their puppet leaders. That means he recognizes their claim to territory in the Donetsk and Luhansk regions that is currently controlled by Kyiv—a fact that plainly sets the stage for mask-off clashes between Russian and Ukrainian forces.

Putin has also declared an end to diplomacy and given Ukraine an ultimatum demanding its “demilitarization”—in other words, its capitulation. The invasion is already underway, and the war appears to be about to ignite.

Which brings me, with no small amount of regret, to a trip-wire subject I usually try to avoid from my desk here in Germany: American politics. Specifically, the talking point (mentioned to me in some reader feedback yesterday) that this is all happening because of President Joe Biden’s “weakness.”

This thesis is a jumble of strands; some too partisan and silly to mention here, but some that raise serious points. For example, there’s a strong case for saying the Obama administration blew it by imposing weak sanctions on Russia over 2014’s annexation of Crimea, thus encouraging Putin to take another bite—though bear in mind that Putin’s prototype military adventure, in Georgia’s South Ossetia region in 2008, drew an even weaker response from the Bush administration.

Republican Sen. Ted Cruz said a few days ago that Biden brought Europe to the brink of war by waiving sanctions on the Nord Stream 2 natural gas pipeline. That may have sent the wrong signal to Putin, but it was also a sop to Germany, a key U.S. ally in this situation, and Germany’s abrupt shelving of Nord Stream 2 yesterday could be seen as a payoff for Biden’s cooperative gesture.

The fact is, the U.S. and its allies have remained pretty much in lockstep when it comes to the strength of their Russian responses. When the U.S. has been weak, so has Europe. Many argue the Western response to the start of Putin’s invasion of Ukraine has also been too weak, but either way the U.S. and EU playbooks are again very similar: slap sanctions on a few Russian banks, elites, and lawmakers, and make it impossible for Russia to trade new (but not old) debt on Western markets. Here’s UBS chief economist Paul Donovan’s take on that this morning:

Some have described sanctions against Russia as “more aggressive.” This is difficult to argue for the macroeconomic impact. Germany closed a pipeline that was not open. Japan banned sovereign debt issuance that does not take place. The U.S. pledged to stop the Russian government accessing international finance they do not really need. The U.K. has focused on threatening to do more in the future. Financial market reactions are more about fear of future action than pricing in current action.

That’s the thing: There’s more action to come. Future historians will be better placed to judge whether it was such a bright idea to hold back some sanctions in the hope of retaining some leverage over Putin—it’s certainly not what the U.S. telegraphed earlier this month, and personally I think Putin is way past caring anyway—but the situation is so fluid and the risk of full-on war so high that we could easily see stronger sanctions imposed within days. If they include truly serious steps like cutting Russia off from the global financial system, that would make the current “weakness” debate moot. But until then, it’s a crucial debate to be having.

More news below.

David Meyer
@superglaze
david.meyer@fortune.com

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This edition of CEO Daily was edited by David Meyer.