(In paragraph 10, makes clear that Russia did not express support for intervention in Libya, but chose not to veto it; in paragraph 17, makes clear that around 40 percent of Germany's natural gas comes from Russia, not 60 percent)
By David Rohde
March 3 (Reuters) - One senior Obama administration official called Vladimir Putin's actions in the Ukraine "outrageous." A second described them as an "outlaw act." A third said his brazen use of military force harked back to a past century.
"What we see here are distinctly 19th and 20th century decisions made by President Putin," said the official who spoke on condition of anonymity to a group of reporters. "But what he needs to understand is that in terms of his economy, he lives in the 21st century world, an interdependent world."
James Jeffrey, a retired career U.S. diplomat, said that view of Putin's mindset cripples the United States' response to the Russian leader. The issue is not that Putin fails to grasp the promise of western-style democratic capitalism. It is that he and other American rivals flatly reject it.
"All of us that have been in the last four administrations have drunk the Kool-Aid," Jeffrey said, referring to the belief that they could talk Putin into seeing the western system as beneficial. "'If they would just understand that it can be a win-win, if we can only convince them' - Putin doesn't see it," Jeffrey said. "The Chinese don't see it. And I think the Iranians don't see it."
Jeffrey and other experts called for short-term caution in the Ukraine. Threatening military action or publicly baiting Putin would likely prompt him to seize more of Ukraine by force.
But they said the seizure of Crimea represents the most significant challenge to the system of international relations in place since the end of the Cold War. Flouting multiple treaties, the United Nations system and long-established international law, Russia has set a dangerously low standard for military intervention.
"There have not been attacks on ethnic Russians," said Kathryn Stoner, a Stanford University professor and leading expert on Russia. "That's just a lie. There was no threat to the (Russian naval) base in Crimea. That is just absurd."
She also argued that the scores of people who died in clashes in the Ukrainian capital before the Russian intervention were Ukrainians, not Russians.
But an unresolved international debate over a series of post-Cold War interventions is threatening to cause sweeping instability. From Europe to the Middle East to Asia, regional powers that might act militarily are watching events in Ukraine.
In Putin's eyes, the United States may struggle to claim any moral high ground. Some Russian and European commentators point out that the United States intervened in Kosovo in 1999 and invaded Iraq in 2003 without United Nations approval. And Russian officials have repeatedly said they regret not vetoing the U.N.-backed 2011 NATO intervention in Libya.
Russian officials and some western commentators have portrayed all of those interventions as western plots to weaken Russia or destabilize countries in the Balkans and the Middle East.
American officials flatly reject those interpretations. They argue that Russia and other authoritarian rulers are cynically manipulating facts and spreading false conspiracy theories to justify the use of military force to enhance their own power.
They point out that sweeping violence had erupted in Kosovo and Libya, threatening large number of civilians. Both interventions also came after months of diplomatic efforts and international public debate. And even the much-criticized invasion of Iraq came after a decade-long cat-and-mouse game between Saddam Hussein and United Nations weapons inspectors, and a year-long effort by the Bush administration to win UN support.
Whatever Russia's intervention represents, the immediate economic leverage the United States has over Russia is limited, according to experts. The most potent weapon Washington could use would be sanctioning Russian banks, companies or individuals, similar to the sanctions that have proven so damaging to Iran's economy.
When asked by reporters on Sunday whether such sanctions were under consideration, senior Obama administration officials declined to comment.
"We're not going to get into any more detail about what's being considered," said one senior official who asked not to be named. "You are absolutely right about the vulnerability of Russian banks. We're looking at all of the options."
A difficulty with effective sanctions lies in Western Europe, where many nations now depend on cheap Russian natural gas to fuel their economies. Germany leads the group, with around 40 percent of its natural gas coming from Russia.
Fiona Hill, a former National Intelligence Officer for Russia and Eurasia at the National Intelligence Council, credited Putin with strengthening Russia economically since gaining power in 2000. Though Russia still has economic challenges, Europe's dependence on Russian gas supplies gives Russia a trump card that did not exist during the post-Soviet chaos of the 1990s, she said.
"In the years since Putin has come to power," she said, "he has removed our leverage."
Putin has also increased the capabilities of the Russian military; crushed or co-opted dissent; and gained iron control of Russia's media.
Throughout the crisis in Ukraine, Russian media have portrayed the protests that overthrew the country's pro-Russian president as an American-backed coup. Hill said recent public opinion polls show that 60 percent of Russians approve of Putin's actions in the Ukraine.
Secure at home, Putin also fears little backlash from abroad. He believes the United States and Europe will publicly condemn Russia but implement few economic sanctions because Europe remains dependent on Russian natural gas.
"The biggest blow would be the largest companies in Germany not doing business" with Russia, Hill said. "That is what Putin banks on: Russia is too big and important."
Stoner, the Stanford professor, said that Putin had outmaneuvered the United States and Europe. Officials in Washington and Brussels had failed to anticipate - or counter - Putin's methodical re-assertion of Russian power.
"NATO and the US, in particular, but also Germany - we've all been caught off-guard here in terms of anticipating this sort of behavior," she said. "It's beyond what people would have expected."
Jeffrey, the former American diplomat, called for a renewed long-term Western effort to increase leverage over Putin. He argued that the economies of the United States and Europe - which are roughly $30 trillion combined - dwarf Russia's $2.5 trillion economy.
He said long-term steps would be accelerating the negotiation of a trans-Atlantic free trade partnership and measures that would increase American natural gas supplies to Europe. A short-term step would be offering major economic aid to Ukraine's desperately cash-strapped new government.
"We are tremendously more powerful than him," Jeffrey said. "We ought to be able to bail out Ukraine. We ought to be able to make Europe less energy dependent on Russia."
Jeffrey said the days and months ahead will be vital. If Putin faces few long-term consequences for seizing Crimea, it will set a precedent for China and other regional powers who may be considering establishing 19th century-style spheres of influence of their own.
"The Chinese," Jeffrey said, "are in the same position." (Editing By Richard Woods)
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