Some thoughts on Putin's calculations from Joshua Yaffa at Foreign Affairs:

To Putin, sovereignty constitutes the essence of power. “Putin’s motivating idea is that Russia’s influence is preordained,” said Sergey Utkin, the head of the Department of Strategic Assessment, part of the Russian Academy of Sciences. “It’s a genuine conviction, a call, a challenge that must be answered in the country’s policies.” Were Putin to back down over Ukraine, even after the attack on MH17, it would mean not just losing face but also turning his back on what he sees as Russia’s historic birthright. It is worth remembering that under the presidency of Dmitry Medvedev, Moscow never embraced the prospect of a so-called reset of U.S.-Russian relations; it simply regarded Washington’s conciliatory pose as a long-overdue adjustment. The impulse to avenge past geopolitical humiliations has intensified in Putin’s current presidential term. And now, the crisis in Ukraine has elevated its champions. For the country’s hodgepodge of hard-liners and nationalists, Utkin said, “confrontation is a plus,” in that it “allows the acquisition of ever more sovereignty.”
U.S. and EU sanctions will likely cause Russia’s GDP growth rate, which was already declining before the Ukraine crisis, to fall even more precipitously. But the latest sanctions do not block Russia’s oil and gas exports, which account for around half of the Kremlin’s budget. Those revenues will continue to flow into state coffers and from there into the pockets of the large contingent of Russians whose livelihoods depend on the government. (About 20 percent of Russians are pensioners, 20 percent work for the state, and 15 percent work for state-owned companies.) And so the sanctions will put little pressure on wages, which are central to political stability. As Vladislav Inozemtsev, an economist and the director of the Centre for Post-Industrial Studies, put it, “Sanctions will take a hit on growth, but they can’t keep Putin from raising salaries of bureaucrats and FSB officers.”