What does Buddhism say about pragmatic retribution?

When we start thinking about a hateful person or a thing, it is ourselves that suffer. The mere mention of the name of someone that we despise will immediately make us think about those bad things that the person did, and get “worked up”. We cause this suffering to ourselves. If we retaliate, then things get even worse. So it is always better to think that things happen for a reason.

We need to keep in mind that someone may be doing something bad (getting in our way), because we may have done something bad to that person in the past. Things always happen for one or more reasons, and we may not be able to see the reason (or the cause) in many cases, because the rebirth process keeps things hidden from us.

It is one thing to be patient. It does NOT mean you have to always be a doormat.

In other words: wisdom over compassion.

Don't make the mistake of reading 'turn the other cheek' whenever you read the word 'compassion'. That is not how Buddhism works.

A good parent knows that for their child to learn, they have to learn boundaries. Similarly, it is not always wise to give into someone else's demands.

One can very compassionately tell someone they're wrong, for instance. Or one can give back a toy to child A after child B has taken it from child A. Child B may throw a tantrum, but that doesn't mean the compassionate action is to give the toy to child B.

Both your divorce and your diplomacy case are not really about compassion. Compassion is about wisely managing your emotions and actions around injustice and suffering.

A diplomat is in the business of managing the relationship between two countries. They have to wisely handle things in such a way that war is averted, concessions are not made without due policy and so on. Compassion can be a tool in that case, but it has to be compassion with the citizens of both the countries involved.

Similarly in a divorce the main objective should be that both parties and any children end up with a livable situation.

There are examples of extreme sacrifice in Buddhist literature - but they're mostly in the context of karma. As in: 'if you sacrifice greatly now, you will get great reward in a future life!' BUT in the context of karma motivation is always key. If you sacrifice with the motivation that it will get you great reward in future, the great reward won't be there, because your motivation was in fact greed.

So the practical way of dealing with conflicts of interest is simply (not that it is often simple) to do what you think is best for all parties concerned, including yourself.

Or to put it different again: be true to yourself and your values. Those values probably include fairness. That way you will be able to live with the results.

The opposite of 'turning the other cheek' is 'an eye for an eye' - that also doesn't work very well. Both are extremes.

Try and find a way of dealing with the other party in a way that is fair, but doesn't escalate things.

There are countless examples of non-retaliation being depicted as admirable.

One that comes to mind is this one: Is That So?

Not that you'll necessarily find the mere fact that it's "admirable" is necessarily a good or sufficient reason -- instead a good reason includes to minimize suffering, allow the cessation of suffering, of those involved.

I don't want to answer the part of the question about diplomats (that seems to me a matter of politics rather than Buddhism).

"Pragmatic retribution" is what I'd call, Tit for tat. It's a popular game (or model, strategy, game theory), but simplistic to the point of stupidity, and I think not Buddhist.

On the subject of divorce, I'd suggest (from experience) that maybe both parties in a divorce should have legal counsel, and perhaps avoid making agreements and concessions without legal counsel (or at least, I think that's the way it works in "my country"). That's not a matter of retribution though, it's a matter of being equitable and finding a division (a "separation agreement") that's fair or as beneficial as possible to both parties.

Also I'm not sure that I agree with the premise of "understanding those who hurt us". Apparently there's a proverb that "to understand is to forgive", but maybe Buddhism has a different take on that subject. I'm thinking of the opening lines of the Dhammapada:

1. Mind precedes all mental states. Mind is their chief; they are all mind-wrought. If with an impure mind a person speaks or acts suffering follows him like the wheel that follows the foot of the ox.
2. Mind precedes all mental states. Mind is their chief; they are all mind-wrought. If with a pure mind a person speaks or acts happiness follows him like his never-departing shadow.
3. "He abused me, he struck me, he overpowered me, he robbed me." Those who harbor such thoughts do not still their hatred.
4. "He abused me, he struck me, he overpowered me, he robbed me." Those who do not harbor such thoughts still their hatred.
5. Hatred is never appeased by hatred in this world. By non-hatred alone is hatred appeased. This is a law eternal.
6. There are those who do not realize that one day we all must die. But those who do realize this settle their quarrels.

The first line is about intention: your intention matters (for example whether you intend to hurt someone, or don't intend to hurt someone).

The third verse seems relevant though. Rather than "understanding those who hurt us" maybe it's better to understand (i.e. maybe "Buddhism would recommend" that you understand) yourself (or the things which you take to be yourself): how and why you're "hurt", what the nature of that hurt is, maybe what "views" you might change (or "abandon") to not be hurt in future. Maybe hurt can be caused by attachment (to something impermanent); considering something (or someone) as "yours"; hurt "pride"; and so on.

I recommend the truth of the sixth verse to you.

It's not clear to me how one can avoid engaging in retribution in some cases.

That's one of the reasons to have a lawyer each, or a mediator in common (or even two lawyers and a mediator). They can be a bit more dispassionate, professional, in dealing with the other party (and you can be more professional when you're dealing with them).

The word 'retribution' means:

...punishment inflicted on someone as vengeance for a wrong or criminal act.

The examples provided are not retribution but are matters of equity & justice.

From a Buddhist perspective, one should proceed in a manner that does not harm oneself or the other. Focus on protecting oneself & one's assets rather than hurting & punishing the other.