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Many analysts — including me — have suggested that Vladimir Putin's Russian regime should pay an economic cost for the ongoing invasion of Crimea, not least to discourage further Russian expansionism into Eastern Europe. Yesterday's "referendum," in which 97 percent of those who took part voted to join Russia, does nothing to change that. After all, having Russian soldiers on the streets and pro-Russian mobs intimidating non-Russians hardly makes for a free and fair vote.
Yet already, the economic consequences of Russia's invasion of Crimea may be coming back to haunt Putin. Reuters reports that Russia's deputy economy minister Sergei Belyakov warned on Monday that the country's economy is in crisis. The Russian economy was already in a perilous state, having shrunk for two consecutive quarters. And now Russia's currency, the ruble, is weakening, causing expectations of growth in inflation. Russia's stock market has fallen significantly during the Ukraine crisis, down over 20 percent already this year.
Will continued economic weakness stop Russian expansionism? Perhaps. The threat to Russian business interests may motivate Russia's oligarchy to rein in Putin. But maybe the opposite happens. Viewed through an economic lens, Putin's takeover of Crimea seems like a diversionary tactic to bolster Putin's support with nationalist fervor while the previously strong Russian economy weakens. If the Russian economy continues to weaken, it's possible that Putin may become more desperate and reckless to maintain his regime's grasp on power.