The people of South Ossetia and Abkhazia were celebrating on Tuesday after Russian President Dmitry Medvedev signed a decree recognising the independence of the two regions. 

Western leaders responded with harsh words. U.S. President George W. Bush said it increased world tensions and Britain called for “the widest possible coalition against Russian aggression in Georgia,” where the two regions lie. 

But what can the West do to punish Russia or discourage it from any similar acts in the future? 

Military action has never been a realistic option since Russia sent tanks and troops to halt Georgia’s assault on South Ossetia. United Nations sanctions are also out of the question because Russia ihas the right of veto on the U.N. Security Council.

Major powers are also reluctant to do anything that might encourage Moscow to withdraw its help with U.N. sanctions against Iran over its nuclear programme and transit support for NATO forces in Afghanistan. 

Retaliation could involve Russian membership of the big international clubs: excluding Russia from the Group of Eight (G8) top industrial democracies or blocking its bid to join the World Trade Organization (WTO). 

But any action will be carried out with the nagging thought at the back of Western leaders’ minds - Moscow is no longer the economic basket-case of Soviet times and, riding a tide of petrodollars from soaring oil prices, western Europe depends on Russian oil and gas.

Russian leaders have signalled they are not troubled by the Western reaction, partly because the Kremlin sees strong public support at home for its actions in Georgia and in the stand-off with the West, and partly because of the wealth it now has from its natural resources.

When NATO suspended activities with Russia, Moscow responded with a shrug of the shoulders, saying it was also freezing activities with the defence alliance. Moscow also plans to halt visits by senior NATO officials and joint military exercises with the alliance.

The European Union could, in theory, send in peacekeepers or break off talks with Russia over a wide-ranging strategic partnership, or even announce economic sanctions such as curbing existing trade arrangements. Moscow has shown no sign of concern over this - such moves would risk Moscow cutting energy supplies to Europe.

“Nothing scares us, including the prospect of a Cold War, but we don’t want it,” Medvedev said on Monday. “In this situation, everything depends on the position of our partners.”            

Does Russia have the upper hand? Perhaps. But despite the talk about a Cold War, there are also reasons to believe it is not about to start and that conflict can be contained.

Moscow’s confidence and strength rests largely on high prices for energy and other natural resources and it is still a far cry from the military force it was in Soviet times. Moscow also no longer controls large swathes of eastern and central Europe and no longer has the huge influence it once enjoyed in other parts of the world. The Kremlin is also likely to be concerned about investment flows into Russia, which ratings agency Fitch says could be affected by the rising tensions. 

Mikhail Kasyanov, a former Russian prime minister turned Kremlin opponent, was quoted by Interfax news agency as saying Moscow’s decision was “one more step towards the self-isolation of the Russian Federation from the international community.”

But Russian Foreign Minister Sergei Lavrov believes isolation is not looming for Russia: ”I don’t believe this should really be a doomsday scenario. I believe common sense should prevail.” 

Imagine driving a car with 27 people on the back seat trying to steer. That’s the image Peter Mandelson painted of his role negotiating at the World Trade Organisation on behalf of all European Union countries - some of which are not entirely supportive of the way he is taking things.

Although the EU gave the trade commissioner a negotiating mandate for the crunch talks under way in Geneva, French President Nicolas Sarkozy, hardly Mandelson’s greatest fan, said he would not sign up to the deal on the table.

Not only does Mandelson have to put up with public barbs from the French leader, he also has to report back daily to national EU delegates who have followed him to Geneva to ensure he keeps to the mandate they gave him. In his blog, Mandelson says it will increasingly be the case in the EU that member states will have to learn to keep quiet and let their representative do the talking.

“There is no question that the decision to negotiate collectively in the WTO gives European member states much greater weight in the WTO and the global trading system, but it does require 27 proud diplomatic services to take a back seat to the EU’s negotiators at exactly the moment when every instinct tells them to have a hand on the wheel,” he said.

“It’s a reminder that so much of the modern European experience of foreign affairs will involve developing the habits of coordination that give us a united voice and role in the world.”

The European Commission has been negotiating on behalf of EU member states for many years on big ticket issues like trade and climate change, but with Ireland’s rejection of the Lisbon Treaty to reform the bloc’s institutions and create an EU foreign policy supremo, do Europeans still relish the idea of Brussels representing them on the global stage?

Where is green beige, 54 the same as 60, and the potato a tropical vegetable? Welcome to the Through the Looking Glass world of the World Trade Organisation.

Although the issues being discussed in Geneva this week could ultimately affect everyone on the planet in terms of their effect on the economy, prices and employment, understanding the jargon of the ‘Doha round’ is reserved for a privileged few who can decipher its twisted language and countless acronyms.

For those like me who are new to covering the WTO, my advice is don’t look for the ‘Green Room’ where ministers and ambassadors are negotiating the trade liberalisation - it’s actually beige. (You’re not allowed in anyway, so steel yourself for hours pacing the hallway downstairs).

Next: know your NAMA from your TRIPS. Almost every aspect of trade is referred to by its acronym. Why say ‘industrial goods’ when you could be talking about NAMA (Non-Agricultural Market Access)? Make sure you know the difference between an LDC (least developed country) and an SVE (small and vulnerable economy), and remember that an MFN (most favoured nation) is nothing of the sort (under WTO rules, all trading partners have to be treated equally. Having MFN status means you are the same as all the others).

Confused? I can highly recommend the European Commission’s online trade glossary.

As for potatoes, they have been considered for inclusion in a list of ‘tropical products’, alongside papaya and coffee, which could be due for a boost from extra tariff cuts. (Potatoes, after all, originated in tropical areas of the Americas, so it’s only logical …)

And when it comes to the numbers, bring a calculator and a sense of humour. When asked whether the European Union was offering to cut its import tariffs by an average of 54 percent, as previously stated, or 60 percent as proposed by European Trade Commissioner Peter Mandelson, French Trade Secretary Anne-Marie Idrac kept a straight face and replied: “54 and 60, c’est la meme chose” (it’s the same thing).