Ukraine crisis: Crimea is lost, but there is a deal waiting to be done

In one tumultuous week we have seen relations between Russia and the West chill to a level not seen since the end of the Cold War. From the Russian viewpoint, Crimea's referendum on Sunday, whatever its flaws, produced an incontestable majority for reunification. This provided the basis for Vladimir Putin's powerful appeal on Tuesday for his people to stand up to the West and take Crimea back, leading directly on Friday to Russia's formal reacquisition of a territory most Russians feel should never have been lost.

But, from the West's point of view, this process, conducted fraudulently and at gunpoint, constituted the first forcible annexation of a European territory since the end of the Second World War. It thus justified two rounds of sanctions on Russia, with the promise of more if Russia doesn't hold back from further destabilisation. The week ended with the signing by the EU and Ukraine of key parts of precisely the agreement which enraged Russia into launching the dispute, and large numbers of Russian troops "exercising" on Ukraine's eastern frontier.

If we are to stop this dangerous escalation we must understand where Russia is coming from. I saw a fair amount of Mr Putin when I was British Ambassador in Moscow. Like most politicians he is ready to manipulate the truth when necessary. But in most of his public utterances he is strikingly faithful to what he genuinely believes. His speech on Tuesday was a compelling example. In particular, the passage where he accused the West of double standards and of systematically undermining Russia came from the heart. In his view we lied to Russia about the expansion of Nato. We have backed every recent Russian enemy from Chechnya's Dudayev to Georgia's Saakashvili. We hypocritically dismiss the Crimean government as illegal while supporting the, equally illegal, government in Kiev. We enthusiastically endorsed Kosovo's independence by referendum while rejecting the identical process in Crimea. Our claim that in the 21st century the world has moved beyond "spheres of influence" is belied by the inexorable expansion of our own sphere via central Europe, the Baltic states, and eventually Georgia and Ukraine, to press on Russia from all directions. We have (as revealed by the support of a string of Western politicians for Kiev's insurrectionists) helped instal a government of quasi-fascists and Russophobes in Ukraine. But Ukraine is the country closest in virtually every way to Russia. This is where the West must be stopped.

We may regard much of this as paranoid and self-serving, but we cannot afford to ignore it. We may believe that, faced with firm western unity and a steadily rising tide of economic sanctions, Russia will eventually back down. That is certainly what our leaders are implying. I am not so sure. First, the huge patriotic impulse Putin has elicited for the reunification with Crimea has made it impossible for him now to give way without thereby losing his job. Second, as Russia well knows, while the West has achieved impressive unity on the modest level of sanctions so far, that unity would be much harder to maintain if we moved to a level which caused our own economies real pain. Third, Ukraine, even without Crimea, is so closely linked to Russia (notably through the Russian speaking east, and the need for Russian gas) that real prosperity and governability will be very hard to achieve without Moscow's cooperation.

And, finally, for Putin and those around him the maintenance of Russia's influence in Ukraine is an issue which transcends economics – it is core to Russia's standing in the world.

The most likely immediate outcome is stasis; the present level of sanctions, Russia firmly in control of Crimea, and Ukraine limping on as a troubled cockpit for East/West competition. But even if the West "wins", with rising levels of sanctions eventually forcing Russia into ignominious retreat, would it have been worth it? The fissures and misgovernment which have dogged Ukraine since independence would only grow deeper. And an embittered Russia would become even more of a thorn in the West's side.

There would be a threat to European energy supplies, which, whatever today's optimistic plans, it will take time and historically implausible levels of political will to shift to other sources. Russia would increasingly obstruct the functioning of the United Nations Security Council, nuclear disarmament, withdrawal from Afghanistan, progress in the Middle East, and a host of other crucial international business (Bashar al-Assad is said to be already heartened by the Russia/West estrangement). And, in the absence of anywhere else to turn, Russia would undoubtedly edge further into the orbit of the world's other key troublesome power, China.

Far better to back away from the abyss and find a deal in which everyone can claim victory. On Crimea, positions now look immovable. Seen by Russia as part of Russia and by everyone else as part of Ukraine, Crimea seems doomed to become another of Europe's "frozen conflicts", like Abkhazia and North Cyprus, on which nations agree to disagree, often for decades. But in the remainder of Ukraine there is an obvious deal to be done. Russia, with its decision not to retaliate against the latest round of EU sanctions, seems ready to get the temperature down. Our ministers, in particular the Prime Minister, should reciprocate by looking for opportunities to talk to the Russians rather than, as at present, just shouting at them. We should be paying more attention to Russia's real fear, which is to see Ukraine swallowed up by the West.

But Ukraine is politically riven, an economic basket case, and partly now under foreign occupation. There is no prospect of its entering either the EU or Nato for decades, if ever. Russia has sought, and we at no practical cost could offer, assurances of Ukraine's political and economic neutrality. We should also be ready to work with Moscow to ensure proper protection of the rights of Ukraine's Russian-speaking population. Such assurances would give Putin the political space to back away from his threatening stance.

And they would give Ukraine the external comfort and internal stability to develop into the prosperous democracy we all want to see. In time, all going well, Ukraine could then serve as an encouragement to her Slavic sister, Russia, to move in the same direction.

Tony Brenton was British ambassador to Russia from 2004-8