Russian President Putin is "living in another world," German Chancellor Merkel reportedly told American President Obama in a recent conversation about the Ukraine crisis, seeking to explain Putin's seemingly reckless actions. Other commentators have found him irrational, even maniacal. Yet for the past few weeks, Putin has been the master of the game, unleashing surprises, creating facts on the ground, defying Western sanctions, astounding all with the audacity of his ambitions. Contrary to the implication of Merkel's remark, we must operate in his world. So perhaps we should make an effort to understand it.

It is not, in fact, alien. Western leaders inhabited it until a few short decades ago; Asian leaders still play by its rules. It is the world of geopolitics, of great-power competition, tailored to Russia's peculiar circumstances. Moreover, to students of Russian history, Putin is a familiar figure, heir to a long tradition of Russian strategic thinking, what Russians would call the "great-power school" of international relations. It is grounded in four key ideas:

- Sovereign states are the central actors in world affairs, as they have been since the Treaty of Westphalia of 1648. Private companies, non-governmental organizations, and other non-state entities are not autonomous actors pursuing their own parochial interests, but rather instruments of state power.

- Conflict is inevitable because sovereign states by their very nature seek to enhance their power and prestige in competition with one another.

- Hard power is the coin of the realm in a world of conflict and disharmony.

- Only great powers can truly pursue independent foreign policies. They are, by definition, the few countries that determine the structure, substance and direction of global affairs.

In line with this thinking, Putin has devoted himself, since he rose to power 14 years ago, to restoring Russia as a great power after the national humiliation of the 1990's. "For the first time in the past 200-300 years," he wrote as he assumed power, "[Russia] is facing a real threat of sliding to the second, and possibly even third, echelon of world states. We are running out of time to counter that threat. We must strain all intellectual, physical and moral forces [to do that]." The path to restored greatness, in his mind, was grounded in the Russian idea, a mix of patriotism, power, statehood and social solidarity.

In his first two terms as president, Putin rebuilt a centralized state and engineered an economic recovery. For the past several years, he has focused on regenerating Russia's hard power by steadily increasing defense spending and modernizing the military. With the annexation of Crimea, he has boldly declared an end to 35 years of geopolitical retreat, which began with Brezhnev's ill-fated invasion of Afghanistan. There was nothing irrational in this approach, and no effort to hide the goals. No one should have been surprised as Putin moved step by step in fulfilling his mission, even if his success has been greater than anyone would have predicted in the year 2000.

For the West, the question is how far Putin intends to press Russia's geopolitical advance. Are there geographical limits to his idea of Russian greatness? Here, too, Russian traditions offer clues.

Russia lies on the nearly barrier-less great Eurasian plain, a vast expanse stretching from Eastern Europe to the Pacific. Strategic depth was essential to security. Consequently, Russian leaders have sought to push borders as far away as possible from the Russian heartland centered on Moscow. Russia's expansion has ended not so much when it ran into defensible physical barriers as when it came up against countervailing powers - the Germanic powers, Germany, Austria and then a united Germany in the west; China in the east; and the Anglo-Saxon powers, first Great Britain and then the United States, in the south. Those powers defined Russia's strategic space.

Today the former Soviet space, with the exceptions of the Baltics and Russia itself, is a region of fragile states, corrupt elites and pervasive poverty that offers little resistance to a dynamic Russia. It was not that way so long ago. In the years after the Soviet collapse, Moscow watched with growing alarm as outside powers, first of all the United States, and non-state forces, especially radical Islamic groups, penetrated into this region, eroding Russia's presence and threatening its security. Until Putin began to rebuild the state, however, Russia did not have the wherewithal to resist.

Two events in 2004 - the Chechen terrorist attack against a grade school in Beslan in the North Caucasus and the Orange Revolution in Ukraine - linked the various threats together in Putin's mind and drove home the dimensions of the challenge. The Beslan attack persuaded him that the United States was using counterterrorism as a smokescreen for geopolitical advance, because it was not above using what he saw as Chechen terrorists "to bite off a juicy piece" of Russia, as he put it. The Orange Revolution made the link in his mind between America's democracy promotion and its geopolitical advance into Russia's strategic space. Indeed, he thought that event was a dress rehearsal for Washington's plans for Russia itself. In response, Putin began to elaborate a coherent policy, combining military, economic and soft-power instruments, to counter the United States and reassert Russia's primacy across the former Soviet space. There followed sharper, albeit largely covert, competition in Central Asia; gas wars against Ukraine and Georgia; the seizure of Abkhazia and South Ossetia from Georgia in 2008; and the annexation of Crimea.

In 2011, Putin announced his long-term ambition - to draw all the former Soviet states into a Eurasian Union, which Russia would dominate. Ukraine is now the central and essential battlefield for this vision, for without Ukraine the union makes neither economic nor strategic sense, given Ukraine's great economic potential and central strategic location between Russia and Europe.

The way to stymie Russian expansion is not by denying visas and freezing assets of Russian officials and their business associates, the West's current approach. Nor will sanctioning entire economic sectors, as the West now threatens, likely succeed. National security always trumps economic well-being in Moscow's - and Putin's - world. Rather history indicates that the way to stop Russia is to organize the regions along its periphery. The West has already done that in Eastern Europe and the Baltics, now safely anchored in the European Union and NATO, although the states there will require reassurance and continued support for deepening integration into European institutions.

But Ukraine, like Moldova and the Caucasian states, teeters on the edge of becoming a failed state. Consolidating it as a modern state is an enormous task, requiring wholesale replacement of a predatory elite that has sabotaged economic development - according to the International Monetary Fund, Ukraine's economy as grown by about a quarter since 1992, while Russia's has more than doubled - and billions of dollars to bridge a short-term financing gap and billions more to build a modern, competitive economy. Putin is betting that the West lacks the resources, the vision and the patience to help consolidate Ukraine. He believes that history is on his side and that his world is the real world. The West has yet to prove him wrong.