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The debate around Crimea is no longer centered on international law: Russian President Vladimir Putin has publicly recognized that he does not feel bound by it and does not care if the rest of the world deems Russia's actions illegal. What is not clear is whether Russia's economy can bear the burden of Putin's objectives in Ukraine.A direct cost of this magnitude amounts to less than 0.5 percent of Russia's GDP.The most important source of potential damage to Russia's economy lies elsewhere.Lack of confidence in Russian policymaking is the main reason for capital flight, low domestic asset prices, declining investment, and an economic slowdown that the Crimea crisis will almost certainly cause to accelerate.Indeed, Russia's response to events in Ukraine has exceeded the worst expectations of those already questioning whether Putin is, as German Chancellor Angela Merkel put it, "in touch with reality". The Monday after Putin's Crimea adventure began, the Central Bank of Russia reportedly spent $11.3 billion to prop up the ruble.
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