President Vladimir Putin has disastrously miscalculated and Russia now faces deeper isolation, tougher sanctions and greater economic hardship than at any time since the Cold War. So declared President Obama after the NATO summit in Brussels.
European leaders have sounded even tougher than Obama, though less specific. Some whose countries lie far from Russia — for example, British Prime Minister David Cameron — have whipped themselves into a fury reminiscent of King Lear: “I will do such things — what they are, yet I know not, but they shall be the terrors of the earth.”
For more specificity we must turn to pundits. Geopolitical experts have predicted global anarchy because of the violation of postwar borders; economists have warned of crippling trade wars as European financial sanctions collide with Russian energy counter-measures, and eminent financial analysts have argued that investors and businesses are dangerously under-pricing enormous geopolitical risks.
Yet Putin seems unperturbed by these threats — and financial markets seem to agree with him. Since the Crimean referendum in mid-March, stock markets around the world have rebounded to almost their record highs, and the ruble and the Moscow stock exchange have been among the world’s strongest markets. Investors seem to have accepted the Russian annexation of Crimea as a fairly harmless fait accompli, with no major consequences for global prosperity or even for Europe.
Markets do not always get politics right. But in this case there are persuasive reasons for putting more faith in the calm financial judgment than in dramatic headlines and belligerent political rhetoric.