> "What would be the response to a nuclear power using one of these in combat? Escalation? Retaliation in kind? The damage to the surrounding environment could be small, especially if used to target submarines and ships."

Look up "Escalate to De-Escalate." The apparent Russian nuclear doctrine involves small-scale nuclear devices (escalation) used in a regional capacity. Their theory, supposedly, is that if only a small nuclear weapon is used in a limited capacity against a military target, a full-scale nuclear response against civilian populations (aka nuclear Armageddon) would be completely unreasonable and consequently the other side would choose to back down (de-escalation).

Now, whether or not Russia actually believes this or merely wants America to believe that Russia believes this is something of an open question. It could be the case that Russia wouldn't actually dare put Escalate to De-Escalate into practice, but merely claim they think it's a good idea as part of their deterrent strategy.