Although it was ignored, Putin's call for pro-Russia rebels to delay their referendum in east Ukraine is a promising development. It is a sign that the Kremlin may be willing to halt the slide into civil war – and bring the warring parties back to the "national dialogue" on Ukraine's constitutional future envisaged by the Geneva agreement.
But the west is kidding itself if it thinks this is the result of the sanctions it imposed last week. Putin's move is more probably part of a broader game. He is subverting the Kiev government and threatening invasion to push through his preferred option: the federalisation of Ukraine on Russian terms.
If anything, the sanctions will be counterproductive – too weak to subdue the Russian bear but strong enough to provoke it. They stop short of sweeping bans on oil and gas exports, on which Russia heavily depends.
Gazprom, the state energy giant, is the Kremlin's biggest weapon against Ukraine, and sanctions against it would seriously hurt Russia's stagnating economy: a loss of revenues from fuel exports might lead to a full-blown crisis for the country's creaking infrastructure and welfare state – and perhaps a broader opposition to the Putin government than the young urban professionals who joined the protest rallies of 2011-12.
But the Russian government has huge reserves to withstand such a crisis, and the EU cannot stop importing fuel without affecting its own economies. About one-third of the EU's gas supplies is imported from Russia. In the new democracies of eastern Europe the figure is twice as high. Putin knows the west is divided – and that, short of military intervention, there is little it can do to stop his undermining of Ukraine.
And Europe, least of all the UK, won't hurt its own business interests. Britain has for years allowed Russian oligarchs to offload their dirty money in its banks, buy up London mansions, football clubs and newspapers, and send their children to elite British schools and universities. Bob Dudley, BP's chief executive, last month announced it would be business as usual in Russia. BP has a 20% share in Rosneft, the Russian state oil company, whose boss, Igor Sechin, is included in the latest US sanctions list.
But Putin's confidence is based on more than the realpolitik of international trade. The Ukrainian crisis has seen his approval ratings soar to a staggering 82%, according to the independent Russian polling centre Levada (not far below his 88% rating in September 2008, just after Russia had defeated Georgia in the war in South Ossetia). We may think he's mad and bad, but ordinary Russians mostly think Putin is the type of strong, patriotic leader Russia needs to defend its interests in the world.
This is where sanctions are likely to be counterproductive. They will give Putin a convenient excuse for economic hardships (largely caused by his cronies' theft and squandering of Russia's riches over many years), and help him to unite the country against its western "enemies".
Many of Putin's actions in Ukraine have as much to do with domestic as foreign politics. Fearful of the Kiev revolution spreading to Moscow, he has taken up the Russian nationalist cause to reinforce his authoritarian regime.
Government control of media has been tightened. Kremlin propaganda talks of "fascists", "spies", "fifth columnists" and "traitors to the motherland" – eliciting memories of the Stalinist terror. The Russians are being told to prepare for sacrifice in the event of long-term sanctions by the west.
The last thing the west should do is send in troops, or give military backing to a Ukrainian offensive against pro-Russia rebels in the east. That would start a civil war and probably provoke a Russian invasion. Sanctions against Putin's personal wealth might have an effect. The Americans say they know where his billions are stashed away by his handlers in western banks. But short of painful fuel embargoes, there is little the west and Ukraine can do except talk to the Russians. And that is the only way – for Russia must be part of the solution to this crisis.
Orlando Figes is professor of history at Birkbeck, University of London.