Russian President Vladimir Putin looks on during a meeting at his Novo-Ogaryovo residence outside Moscow, on July 24, 2014. (Mikhail Klimentyev/AFPGetty Images)

While European diplomats were discussing further sanctions against Russia, a Dutch arbitration court ordered a record-high compensation package on Monday, making a landmark decision that could see Russia pay out more than $50 billion dollars.

The case has a dramatic back-story, centered around the 2003 arrest of Russian billionaire Mikhail Khodorkovsky and the Russian state's seizure of oil producer Yukos's assets. For years, former Yukos shareholders have argued that the Kremlin forced the downfall of the company due for political and financial reasons. In their decision on Monday, the Hague's Permanent Court of Arbitration did indeed find evidence supporting that thesis.

But there's one big question: Will Russia actually pay up?

“Fifty billion dollars represents about 2.5 percent of Russia’s GDP. It is an incredible amount of money,” Liana Fix, an Associate Fellow at Germany’s Robert Bosch Center (DGAP) who focuses on the region, explains. Russia has already balked at the ruling, with the Russian finance ministry accusing the arbitration court of being “politically biased” and questioning its jurisdiction.

Fix says it is "highly unlikely" such a tactic would work. “The repercussions could be catastrophic for Russia and hurt much more than the sanctions already imposed on the country," she says. “In order to restore confidence among foreign investors, Russia would therefore be well advised to pay the award now."

For one, Russia's state energy companies would likely suffer. “Both Rosneft as well as Gazprom have lots of debts abroad," Fabian Burkhardt, a PhD researcher at the Graduate School for East and Southeast European Studies at LMU Munich says. "The ruling as well as the new sanctions will make it difficult for them to refinance their credits.”

But the worst-case scenario for Russia would be the seizure of its assets abroad. In an opinion piece for the Kyiv Post, Peterson Institute fellow Anders Aslund spelled out how serious that would be:

“Should Russia reject the ruling, operations of Russian state companies will suffer from major disruptions, with their bank accounts, commercial ships, and cargo seized around the world. […] In fact, the economic impact of the tribunal’s judgment is likely to be greater than the cost to Russia of the sanctions.”

The ruling comes at a sensitive time in Russian relations to the west, following months of heightened tensions over Ukraine and the recent Malaysia Airlines crash. On Tuesday, the European Union and the United States announced expanded sanctions mainly targeting arms deals with Russia. “It is very likely that Russians who know about this award will link it directly to the current confrontation between Russia and the West, not realizing that these legal judgments have their own independent timetables,” Angela Stent, Director of the Center for Eurasian, Russian and East European Studies at Georgetown University says.

In the end, the arbitration award may well be seen from two very different viewpoints: While the West may accuse Russia of failing to accept its defeat in the settlement, Russia may well view the decision as part of a political game. Either way, it looks like more isolation.

“Russia’s loss in the Hague was certainly not a complete surprise to Russia," Burkhardt says, "However, the unexpected sanctions in combination with the ruling will create a momentum with repercussions that are hard to predict.”