I am starting to lose this one. How dare anyone excuse a great power hurling brute force against a small one, justifying it with some nonsense about extremists and a "responsibility to protect". There should be no place for such cynical bullying in a 21st-century world order. And for what? So a leader with a virility complex can play to his domestic gallery. The whole thing is utterly unacceptable. There must be costs and consequences.

But enough of Iraq. What of Ukraine? We can only gasp at the hypocrisy of a British foreign secretary and an American secretary of state lecturing Russia from a Kiev street corner on the evil of invading small countries. Did no ghost of Iraq or Afghanistan, of Kosovo or Libya, hover over their shoulders? To be sure there are motes in Vladimir Putin's eye, but they are nothing as to the beams in the eyes of Washington and London. The occupation of Crimea is a village fete compared with shock and awe over Baghdad and Belgrade and the killing fields of Falluja and Helmand. As the western powers repatriate their blood-stained legions, surely a twinge of humility is in order.

Apparently not. The west is now chanting psalms of self-righteousness. David Cameron agrees with Barack Obama that Crimea is "completely unacceptable". John Kerry calls the occupation "an incredible act of aggression ... on a trumped-up pretext". To the Republican senator John McCain, "allowing" Russia to take Crimea makes him "remember the 1930s when Hitler took the Sudetenland".

The catchphrase for this crisis has become "costs and consequences". Obama threatens them, Cameron threatens them. The Commons Ukraine committee chairman, John Whittingdale, wants them "to send a very strong message" to Putin to "return to the table". Nick Clegg froths over them from his armchair. He is "absolutely not ruling out now the kind of options we will look at in order to make it very clear to Putin that there will be very real consequences". Wow.

The only costs and consequences on which anyone can agree is to cancel a G-something summit in a luxury hotel somewhere, and to ban oligarchs from shopping at Harrods and sending their sons to Eton. We might also keep our royals from their Paralympics. To this has the mighty British empire fallen. For all its armies, fleets and nuclear warheads, it can punish Russia's bear with nothing more terrifying than Harrods, Eton and the royal family. Putin must be rolling on the floor with laughter.

The truth is that western diplomacy has no language for the new impotence. It used to get its way by "drawing red lines" and threatening actual violence. So ineptly have post-cold war politicians deployed this threat, so exorbitant has been the cost, that enemies have come to treat it as bluff. Iran and Syria are the most recent examples. By the time Cameron tried to threaten Damascus with bombs, the British parliament had had enough. If Syria could call Cameron's bluff, how much more likely would Russia be to do so?

What has been encouraging about the Ukraine crisis so far has been the unusual emergence of a "case to be made" on both sides. For once we have seen a "revolution" with some balanced coverage. The BBC's Newsnight investigated the "fascist coup" in Kiev thesis, and found some truth in it. The legitimacy of Viktor Yanukovych as elected leader was contrasted with his manifest flaws, as was the motley character of the Maidan crowd. We know of the divided loyalties of Crimea and eastern Ukraine.

In the past week I have read more than I dreamed possible of the vexed history of Crimea, of Ukraine's role in Russian identity, and of Putin's complex relationship with Russian pride and paranoia. I have seen Moscow's re-occupation of Crimea as both understandable and illegitimate. Its legal crudity – without even awaiting a local referendum – compares with the political crudity of Nato's attempted encirclement.

This is a theatre on whose stage the fidgeting warmongers of London and Washington fear to tread. Even when McCain crassly compares Putin to Hitler, he nervously adds that he is against military action. The west can huff and puff, but dare not bomb. In a Pavlovian trance that requires "something to be done", it cannot think what that might be.

Democratic leaders usually find foreign affairs easy. They can relax into grandstanding, machismo and cliche, with little downside. Regular foreign trips (Cameron is addicted to them) offer a break, a stroll up a red carpet, and relief from the pestilential press.

Ukraine has changed that. It is proving fiendishly difficult for compulsive interveners. Nothing seems fit for purpose. Every threat sounds empty. But at least pragmatism is starting to break through. On Monday the Foreign Office indicated as much in its new, exotic form of press release: a document revealed to photographers on a Downing Street pavement.

This indicated how far the government has moved since its Iran belligerence. While William Hague was playing to the Kiev gallery, his officials were studiously analysing the content of "costs and consequences". They concluded there should be no military contingencies or economic sanctions on Russia, or at least none that might hurt the City of London. There should be financial relief for the new regime in Kiev, but for Russia merely the usual waffle about missions and all-party talks. As with China over Tibet, London knows it is dealing with a big, rich beast, not a small, poor one. It deals with care.

I find this encouraging. Britain is still searching for a new metaphor for "punching below its weight". Its leaders may invite Kipling's ridicule for "killing Kruger with your mouth", but behind the verbal bluster they seem to recognise the inanity of the Foreign Office's "department of meaningless gestures". They may yet move towards Germany's department of sensible and measured response. Angela Merkel is not hollering about costs and consequences. Why waste her breath?

When I was visiting Russia in 2006 I asked a diplomat how Moscow would react to Britain's current invasion of Helmand in Afghanistan. He smiled and said: "Don't worry. We won't boycott your Olympics." He had the measure of Britain's foreign policy at the time. Today's Russia knows what it wants while Britain is playing games. If hypocrisy is now cover for realpolitik, that is good. Less good is that we have to learn it from Vladimir Putin.