By Mark Trevelyan

(Reuters) – President Vladimir Putin has shifted Ukraine’s crisis into a more serious phase by using a torrent of words and actions. His ultimate goals go beyond extending Russian sway to two troubled separatist areas.

Putin signed Monday night friendship agreements with the Donetsk- and Lugansk People’s Republics, which were proclaimed in Ukraine by Russian-backed separatists. This move was denounced by the West as illegal and met immediate sanctions including those on Russian banks, and on a large new pipeline.

The extraordinary, televised speech before the signing offered more insight into Putin’s thought process. In it, he turned centuries of history into an hour-long diatribe describing Ukraine as an artificial state with no traditions of being a nation.

Kremlin observers said that his speech seemed to be an attempt at justifying deeper aggression against Ukraine, and possibly a new invasion. This was eight years after the capture and annexed Crimea.

Gerhard Mangott (a professor at Austria’s Innsbruck University) said that he had questioned Ukraine’s sovereignty and declared it a historical mistake and an accident that Ukraine exists.” He is also part of a group consisting of Russia experts who meet each year with Putin.

His final goal is “to destroy the Ukrainian state” or to make Ukraine into two independent halves, he stated, with Russia in charge of the eastern region.

Putin made significant comments Tuesday in follow-up remarks, saying he recognized the whole of the Donetsk, Luhansk, and Donbass regions of eastern Ukraine as their “republics” for forming. However, only a small portion of this territory is under the control of the separatists.

Russia has stated that it is allowed to build bases and send troops under the new treaties. This opens Russia up to the possibility of waging war against Ukraine in order to expand the territories.

“AT A LOSS”

Putin denied ever intending to invade Ukraine, but the massive military buildup at its borders in November has caused sharp falls in Russian shares and government bonds as well as the rouble. Russia’s elite has been anxious by his latest moves.

“We’re all at a loss. We’re all very nervous. A former official high up said that no one can predict the final outcome.

Putin’s recent move ended any hope of ending Ukraine’s eight-year-old separatist conflict by renewing the peace agreements from 2014 and 2015. This is a worrying shift away diplomacy in favor of force.

Oleg Ignatov (senior analyst, Russia, International Crisis Group) stated that Russia had abandoned the Minsk Agreements and thus lost one of its avenues of long-term political leverage over Ukraine. He said, “Russia has now been seeking another avenue to achieve this potential long-term political leverage.”

Putin’s speech reflected a man who is more concerned about his legacy after two decades of being Russia’s supreme leader than the economic and casualties that full-scale conflict with Ukraine could cause.

Following comments by Boris Johnson, the British Prime Minister, this week it was clear that Putin could be struggling to think rationally. Sanctions might not work against an “irrational actor”. Mark Rutte from the Netherlands described him as “totally paronoid”.

Neil Melvin, a London-based think tank RUSI, stated that “We have seen a shift in Putin’s (as) being a pragmatic, rational, calculating leader to somebody who is increasingly looking at their place in history and who sees themselves on a historic mission to right injustices.”

He said that this resulted in a change in Putin’s risk calculus, where the immediate costs of his actions are insignificant in comparison to the greater historical picture.

Melvin recently returned to Moscow from meeting with Russian senior officials and said that the Ukraine crisis was just beginning.

He stated, “To be honest, you don’t send 200,000 soldiers to the Ukraine border and incite the largest crisis in European security over 40 years if you’re only trying to extend your control on two small territories you already own.”

The Russian military forces entering Donetsk or Luhansk would determine the next step. There may also be moves to extend into more territory depending on Ukraine’s response.

Melvin stated, “I believe that’s the thing we should look for right now.” Melvin said, “It is how will we pull the trigger for this larger military incursion?”