I'd give you more but it would seem self serving. This is an amazing piece of nuanced writing about the uses of power and morality. I have watched poli-sci grad students fail at articulating these concepts as precisely and eloquently as you just did.
I agree with your conclusion. This is not going to escalate unless Europe pushes it, and they are not going to do that. They will go the sanctions route and make Russia a pariah state. It's the safest play for them and under normal circumstances it would work.
This is so far outside the pale that Putin would never be able to buy his way out of it. Which is the tell that he doesn't think these are normal times. He must really believe that desperate times are coming to take this chance.
He has access to some of the best information in the world. He is not Trump, Putin is a person who understands numbers and what they mean. If he is willing to do this, I tremble at the thought of what information he is looking at.
I really hope I'm wrong about this.