Third possibility. Russia pushes into Ukraine and is bled by guerrilla warfare till it withdraws with an even more broken economy.
Putin is playing a masterful hand with weak cards at the moment, I'll give him that. Then again, he is primarily playing against Obama who is about as stupid as they come.
Russia isn't really that strong. Ukraine is a broken shell right now, but it will get it's act together and Russia's annexation of the Crimea was probably enough to unify most Ukrainians (even many ethnic Russians) to fight hard to keep the rest.
That's what the Chechen terrorists and Chechen Military said about Russian Military at it weakest point, twenty years ago.
The Chechen Military is now one of the options Putin can order against the Ukes if he so chooses. Let's hope he doesn't, because they will do as they are told.
My feeling is that Obama is crazy like a fox. Obama wants to make the US a European-style welfare state. But in order to pay for that, he is prepared to end the US's role as military welfare provider to the world. Some European countries are coming around to the view that Uncle Sam won't always be willing to be their defender of first resort. Accordingly, they are looking at increases in defense expenditures, for the first time since the end of the Cold War.