This is Putin's big year, he will be hosting the G8 Summit, and he has said it will be about energy security.
Do you think it is in Putin's energy security interest to prevent drilling in ANWAR???
It actually might be time to be thinking about withdrawing from the G8 Summit as long as it's held in St. Petersburg, or returning to the G-7 format.
If it is shown that this intelligence sharing with the Iraqis was indeed sanctioned officially, I'd say we've reached the "punishment" phase in our relationship. If Putin's government is guilty it's a huge slap in the face to Bush and America and should be responded to in kind.
If we do not respond strongly (but only after all the facts are in) we send a very bad message about our own strength. The Russians will be watching how we react to this and what we do about it. They will base future decisions on our handling of this. If we let them slide, they'll continue to play. If we hurt them economically, and politically, they will think twice about crossing us. If they think the Chinese will be there for them they'll be sadly mistaken (as the Chinese have shown time and time again).
If the Russians claim Titorenko acted on his own, I would (were I Bush or Rice) not accept anything less than an investigation and charges brought against the Ambassador.
It's time for Putin and company to a.) reign in their security folk, b.) take a good look at what the US is actually capable of doing to them (speed up NATO membership for Ukraine, Georgia and Azerbaijan, etc.), and c.) realize how much more difficult we can make their lives via blocking arms trading, membership into international organizations, etc.. If they think this is the way to become an honest broker in international politics, it's time for them to go back to the Diplomatic Academy....
Once again, I'd wait until all the facts were in, but if these charges are true, it's time to peel off the nice guy gloves.