On March 16, Russian President Vladimir Putin took Western leaders for a ride. The secession vote on the Crimean peninsula was a thinly disguised provocation of the international community. This was a farcical referendum with a dictated outcome, wrapped in a pseudo-democratic vote where over 96% of people chose Russian annexation over staying with Ukraine.

A truly astonishing result, considering that the ethnic Russian contingent on the peninsula only counts for 60% of the population. Nobody in their right mind could possibly believe that only 1 out of 10 nationalist Ukrainians and Tatars voted for Crimea to remain a part of Ukraine while the other 9 chose to join Mother Russia.

The Russian government was quick to recognize Crimea as an independent country soon to be annexed while U.S. Vice President Joe Biden called it what it is: a simple, calculated “land grab”.

Western leaders stand united in their outrage at what just happened. The heads of the world’s leading democracies had to make some noise in the face of Russia’s threat against the territorial integrity of a neighboring state. International law was broken and Putin’s incursion into territorial Ukraine cannot just be shrugged off.

However, the sanctions imposed by the West hardly impress anybody in the Kremlin or elsewhere. Issuing travel bans and asset freezes against a couple of dozen actors in the Russian and Crimean government looks awfully like desperate parents grounding a disobedient teenage child. The “punishment” by Western states is more symbolic than effective, as is the Kremlin’s refusal to allow a group of Canadian and U.S. politicians entering Russia to attend some conference.

Years of service at the KGB taught Mr. Putin how to stare down empty threats. This time is no different. Russia has deliberately chosen a path of aggression and alienation and accepted its consequences, diplomatic isolation via exclusion from the G8 and a diving ruble among them.

“Tsar Vlad” is not going to back down in the face of the POTUS waving his index finger, particularly not in a critical case like the Ukraine. While Putin’s reaction to the protests on Kiew’s Maidan must not be condoned, it was highly predictable. Former U.S. President Jimmy Carter called Putin’s annexation of Crimea “inevitable”. The West should have seen this coming for a long time.

The current confrontation is a paranoid dictator’s response to the West’s political ambition on the eastern fringe of Europe before the dawn of the 21st Century. It is best exemplified by NATO bringing in Poland as a new member state in 1999, less than a decade after the fall of the USSR, followed by the Baltic Troika and Romania in 2004.

It is not hard to imagine that these former USSR member nations crossing over to the Cold War enemy left a bitter aftertaste in the Kremlin. But Yeltsin’s Russia was weak politically, militarily and economically and the West used this weakness after the fall of the Iron Curtain to expand NATO. The exploitation by the West came with the side effect of increased Russian paranoia.

No wonder then, that the newly selfconscious Russia of 2014 seized the moment to show the West that it would not allow Ukraine to become the next Poland or Romania, throwing itself into the arms of an E.U. thirsty for more people and territory, all of it protected by NATO.

Crimea has been part of Russia for centuries before Nikita Krushchew decided to give it away to the Ukrainian Soviet Republic in 1954. With the new cabinet in Kiew cozying up to Berlin and Washington, Moscow saw itself forced to protect not only ethnic Russians but also its Navy port in Sevastopol. Mother Russia wants its children back and its warships under control.

All this said, the E.U. and the U.S. need to be careful in their support of Ukraine. In its current state, democracy in Ukraine is a mirage. Kleptocracy is a more appropriate description of Ukraine’s form of government. Whether the country will find its way to a democracy worthy of the label after the May elections will depend on what distance it will manage to establish from the ridiculously corrupt Ms. Timoschenko and her powerful oligarch friends.

The best the West can do is to assist Ukraine getting on the long road to democratic renewal and then wait, and see before formally making the country an E.U. or NATO member.

As for the United States, Saber rattling is misplaced as an instrument to find a diplomatic solution to the highly complex situation in Eastern Europe. Even more so since everybody seems to agree that military confrontation is not a viable option. President Obama understands this and his reluctance to revive the Cold War rhetoric should not be misunderstood as weakness.

Some say the dovish stance of Western leaders against Putin’s aggression looks awfully like Neville Chamberlain’s appeasement of Hitler in 1938. The analogy is understandable as there is an undeniable similarity between Putin’s move on Crimea and Hitler’s grab of Sudetenland. Comparing Putin to Hitler though is an unwarranted stretch that contributes little to dealing with the crisis.

It’s really quite simple: The U.S. needs a functional working relationship, not a new arms race, with Moscow in order to deal with the developing mess in the Middle East, the new ambitions of Iran and the pariahs in Pyongyang. For Europe things are even simpler: it needs Russia to supply energy.

Heated rhetoric was justified in the lead-up to the farcical Crimean vote, but it now needs to make room for smart diplomacy, probably best led by German Chancellor Merkel who, among Western leaders, seems to have the best connection with Mr. Putin. Plus the two are fluent in each other’s language so nothing should get lost in translation.

Beat Guldimann, owner of Tribeca Consulting Group, holds a Doctorate in Law from the University of Basel; he was legal counsel at the former SBC (86-96), President and CEO of UBS Canada (97-01), Head of Global Private Banking at CIBC (01-04) and Vice-Chairman at Hampton Securities (05-07).