People say crazy and that is an incorrect assessment. Putin is negotiating both with the Russian populace/elite and with the west. In the West/free world we view negotiation as two parties acting in good faith who each have goals and then work toward a mutually agreeable solution with compromises by both parties.
He is Russian and their industrial/modern era MO when negotiating with the West has been to threaten, demand everything, , escalate, threaten, demand again, and escalate some more. Often the West then gives them a lot of what they want and requires little or nothing, often only getting Russia to agree to remove the threat they themselves created as a leverage tool to get concessions.
So Putin is acting/negotiating as he and Russia often do, but the difference is that he has started this by asking and taking far more than the West could allow. His age, health and desire for historical importance have already been discussed as reasons for over-stepping Russia’s normal incremental approach. My thought when this was about to start was that Russia would just invade the two disputed territories and no more, and that if he had done only that, and limited his actions to just those areas, that the US and West Would have pushed back much less and we would eventually get to a point where we dispute it but generally accept it like Crimea. Or historically like Austria, then the Sudetenland’s, then Czechoslovakia, etc. Incremental conquest with words of peace if only everyone allows it to stand.
As it is clear, and Putin himself has said, that all of Ukraine is the current but not final conquest, It is actually good for us that he grossly misplayed this.
But back to crazy. He is here and while reality of the military situation and economic situation should push him to reassess, I think his personal reasons keep him trying to “negotiate” this in the same way he and Russia always have. So he acts and negotiates as he knows best with the West, and honestly how we have trained him again and again through capitulation, that it will work.
So he will continue with brinksmanship, and we need to ignore it as if it was a child’s tantrum, we should act like adults, go all in for Ukraine to defend and take back their territory with equipment, training and intel, and try to avoid direct involvement (NATO servicemen and NATO launched bombs) being used at Russian troops.
There will be more threats, more brinksmanship, more veiled sabotage and espionage, because that is what Putin knows and also all he has got.
It may seem crazy when viewed from the prism of Western negotiations, but that is because it has been 30 years or so since living with and understanding Russia/USSR was more common.