Is the crisis in Ukraine almost over or just beginning? The answer depends on what Vladimir Putin really wants and what the West does next.

Did Putin want nothing more than to seize Crimea, to turn Russia’s control of the republic from de facto to de jure—or does he want to creep deeper into southern and eastern Ukraine on the pretext of “fraternal assistance” to ethnic Russians?

Either way, two things should be understood. First, Putin’s actions have been driven less by a belief that the West is weak than his knowledge that Russia is. Second, he dreams of restoring Russia’s empire—his March 18 Kremlin speech is, at heart, a cry of resentment against the West for its humiliation of his country during the early years after the Soviet Union’s collapse. A bitter autocrat with a head full of grandiose daydreams can be a dangerous creature.

This crisis began, after all, when Putin took notice that Ukraine—which he and every other Russian leader in history have regarded as deeply tied to Russia—was drifting into the West’s orbit. Then-President Viktor Yanukovych had taken steps toward an affiliation with the European Union. Putin feared, correctly, that this development could wreck his plans for a “Eurasian Union” (which he saw as the basis for a revived Russian empire), and so he offered Yanukovych $15 billion in exchange for backing out of the Western league. Yanukovych took the bribe. Demonstrations broke out in Kiev, prompting crackdowns, prompting a widening of the protests … and the rest, we all know.

Lawrence Freedman, the pre-eminent scholar of strategy, has a long blog post in Wednesday’s War on the Rocks, noting that the “basic challenge of crisis management is to protect core interests while avoiding major war.” Part of this challenge, he adds, involves “a sense of knowing when to exercise restraints and respect limits,” as well as “a grasp of what the adversary needs to enable it to de-escalate or at least to desist from further escalation.”

The first step to take in following this idea—a step that many pundits and politicians have skipped—is to define what our “core interests” are. Crimea is not a core interest to the United States or the West; it is a core interest to Russia. Cold as it may seem to say, Crimea is gone; there’s nothing we can do to get it back, and we—however you define “we”—never really had it to begin with.

However, the forcible annexation of Crimea did violate international law. Specifically, it broke the 1994 Budapest Memorandum, signed by Russia, the United States, and the United Kingdom, which—while it didn’t have the binding effect of the North Atlantic Treaty that established NATO—did offer Ukraine security assurances in exchange for giving up the 2,000 nuclear weapons left in its territory as a remnant of Soviet days.

So, yes, it’s worth getting upset about the seizure of Crimea. The things that President Obama and the European Union have done—relatively mild sanctions, the exclusion of Russia from an upcoming G-7 (formerly G-8) meeting, the shoring up of defenses in Poland and the Baltic nations, and presumably more actions of this sort to come—are proportional steps worth taking.

But no one should suffer the illusion that any of this will prod Putin to send the troops in Crimea home (most of them were already stationed there) or give the land back to Ukraine. To pretend that it might—as some of Obama’s rhetoric about “costs” and “consequences” has implied—works only to Putin’s benefit; it makes him seem stronger (he’s withstood the American sanctions!) than he really is.

However, if Putin starts moving troops into southern and eastern Ukraine, the story changes. It doesn’t change quite so drastically as some contend. Ukraine, after all, is not a member of NATO, and for good reason. (During George W. Bush’s presidency, there was talk of fast-tracking Ukraine for NATO membership, but it turned out few Ukrainians wanted to join, and few NATO allies valued Ukraine enough to go to war in the event of an attack.)

Still, if Putin did make further incursions, it would be a sign that he was acting on his dreams of revivified empire, trying to make them come true. And in that, he must be resisted, not just for the sake of Ukraine but for the stability of Europe and the preservation of what little orderliness there is in the world today. For if Russia can get away with chopping up Ukraine, in the heart of what was once hoped to be a united Europe, then other leaders who crave neighbors’ land might be emboldened to act on their dreams, too. And in any case, American warnings—perhaps the deterrent power of the U.S. military generally—would lose all potency.

And so the main goal of the United States, the EU, and NATO should be to deter and dissuade Putin from moving his troops deeper into Ukraine. There are two ways to do this, seemingly contradictory but actually (if well-managed) complementary. First, ratchet up the penalties. Second, leave room for diplomacy.

The penalties should include—right now—stepping up military deployments to the NATO allies, especially to Poland and the Baltic nations, which were once tied to the Soviet Union. Another: Draw up plans for containing and countering Russian troops in the event of an incursion into Ukraine—not sending U.S. or NATO troops, but shipping arms, maybe some advisers and black-bag Delta forces—and talk about these plans with the allies, and Ukrainian officials, on open phone lines. Putin surely knows the limits of his army. The ground forces in that sector of Russia could invade Ukraine, but they lack the resources and logistical lines to sustain an occupation for very long, especially in the event of even slight resistance. We have to make him realize we know these limitations, too.

Over those same unencrypted phone lines, a senior official should also talk about some moves that would really isolate Russia from the rest of the world, too—cutting it off from all international forums (Putin, above all, wants to be respected as a major world figure), freezing out not just a couple dozen Kremlin cronies but Russian banks and corporations. Again, these are threats of actions to take place if Russia goes deeper into Ukraine—not reprisals for the seizure of Crimea, which would have no effect and probably wouldn’t be enforced anyway.

Finally, plans should be drawn up to flood Ukraine with Western money. Putin knows that the Warsaw Pact nations that joined the EU are much better off than those that didn’t. Freedman points out that, in 1990, just before the implosion of the Soviet Union, Poland’s GDP amounted to $64.5 billion, while Ukraine’s was a bit better at $90.2 billion. In 2012 Poland’s had skyrocketed to $489.9 billion, while Ukraine’s was much worse at $176.3 billion. Make plans to turn Ukraine into another showcase—another way of demonstrating to Russia’s thinning gang of allies that they’ve chosen the wrong side.

At the same time, the road to reconciliation shouldn’t be cut off. (Even after Nikita Khrushchev sent nuclear-tipped missiles to Cuba, John F. Kennedy kept looking for face-saving ways to back down.) It’s worth keeping in mind that this crisis—a mere spat compared with the one over missiles in Cuba—is about getting Ukraine in a good, or passably decent, place. As Obama and Secretary of State John Kerry have acknowledged, Ukraine will always have ties with Russia, regardless of who is in the Kremlin. As the flip side of threats to step up the pressure if Putin moves deeper into Ukraine, Obama should assure him that he won’t lose Ukraine if he steps back.

Putin grew up in a culture of conspiracy—by which I mean not just the KGB but Russia itself. Putin has publicly said that the West orchestrated the recent protests in Kiev, that the Orange Revolution was an outright American plot, that the CIA is constantly seeking ways to undermine Russia’s political system and its network of allies—and he probably believes what he’s saying.

What’s going on now is not Cold War II. The Cold War split the entire world in two factions. Scads of civil wars, regional wars, and wars of national liberation were, in some sense, “proxy wars” in the titanic struggle between the United States and the Soviet Union. China was used as a lever for playing one side off the other—and China played off both. Nothing like that is going on now. Nothing like it could possibly go on now. Neither side has the leverage to do it. Russia has no global reach whatsoever. Russia has no support for its actions in Ukraine; China has evinced no interest in it.

Right now, then, this is at most a regional conflict, not a global one, and the best thing that Obama can do—in both his threats and his inducements—is to keep it that way. Certain Republicans on Capitol Hill could help. Senators like John McCain and Lindsey Graham, who used to know better, could lay off their absurd yelping about Obama’s “weakness” and “feckless leadership.” For one thing, it’s not true; at least when it comes to this crisis, they’ve recommended very few steps that Obama hasn’t already taken. If they’re really worried about Putin’s perceptions of America, instead of merely clamoring to make political points with GOP extremists, they should stand by the president and make sure Putin understands that, on this issue, there are no domestic fissures for him to exploit.