Through 15 years in power – through all the outcry about the shrinking of rights and democracy in his country – President Vladimir Putin has delivered Russians the one thing they craved most: the economic stability their country lacked during the crisis-wracked 1990s.

That era of stabilnost came to a definitive end on Tuesday, as a desperate effort by Russia's central bank – which jacked interest rates from 10.5 per cent to a growth-choking 17 per cent – failed to halt the precipitous slide of the country's currency, the ruble. After a record-breaking plunge on Monday took the ruble past the psychological mark of 65 to the U.S. dollar, or roughly half the value it had at the opening of the Sochi Olympics in February, it finished the trading day Tuesday at just over 72 .

Mr. Putin's foes in the West are taking open delight in Russia's woes, hoping that a collapsing economy will persuade Russians to take to the streets against him. But in the short term, a weakened Kremlin is likely to become even more defiant and unpredictable. Those close to Mr. Putin say he's far more likely to escalate his confrontation with NATO than back down now.

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Despite the high-fives in Washington, Brussels and Ottawa, Western sanctions aren't the reason the economy is crashing. The anchor dragging the ruble down is the price of oil, by far the country's most important export, which hit a five-year low of $59 (U.S.) a barrel on Tuesday.

Adding to the bad news, Gazprom, the massive state-owned energy giant – and the employer of nearly half-a-million people – announced Tuesday that it would lay off a quarter of its staff. Meanwhile, the leading RTS stock exchange took a 17-per-cent dive, highlighted by an 18-per-cent fall in the value of shares in Sberbank, Russia's biggest bank.

The Kremlin has already admitted the country's economy is on course to shrink 0.8 per cent next year. That may prove to be a rather rosy estimate.

Russians have seen times like these before. It was called the Boris Yeltsin era, a period of time usually referred to with a spit by those who lived through the chaotic 1990s. Mr. Putin came to power in its aftermath, and made himself popular by delivering stabilnost, thanks in large part to sky-high oil prices and a steady currency.

Stabilnost arguably came to an end back in March, when masked Russian troops oversaw the annexation of Crimea.

But the Crimea takeover, and Russia's subsequent backing of armed separatists in eastern Ukraine, were the work of an assertive Kremlin, one that felt strong enough to push back hard after what it saw as a Western-sponsored revolution in Kiev. All year long, Mr. Putin has seemed to be one move ahead of the West, seizing the political and military advantage by keeping politicians in the United States and European Union guessing about what he'd do next. An insecure Kremlin will be even harder to predict.

There has always been a divide in Western policy-making circles about how far Mr. Putin is willing to go in escalating this new Cold War that began in earnest in 2014. Those who see the Russian President as a pragmatic operator have always believed that – Crimea aside – his actions in eastern Ukraine were defined by a set policy goal (keeping Ukraine from being able to join the EU or NATO), one that has arguably now been realized with the establishment of a "frozen" conflict in the Donetsk and Lugansk regions.

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A second attempt at a ceasefire there appears to be holding, at least for now, raising the prospect of an end to the period of open warfare and perhaps the rolling back of some of the Western sanctions against Moscow.

But that scenario required a patient rebuilding of trust between first Moscow and Kiev, and then between Moscow and the West. And as Russia's economic woes increase, Mr. Putin may feel the patient and pragmatic route is no longer an option.

Which increases the likelihood that the pragmatists will be proven wrong, and that the alarmists – those who see Mr. Putin as a mini-Hitler, intent on rebuilding the old Soviet Union – will seem the wiser side.

To head off any popular discontent, he will have few tools at his disposal other than rallying Russians around flag and country. And nothing drives nationalism like war, particularly one with the alleged aim of protecting Russian-speakers living beyond the country's borders.

Russians have been told (by state-controlled media) since the beginning of the Ukraine crisis that the Kremlin took the actions it did to counter a coup by Russian-hating "fascists" in Kiev. Opinion polls show that most believed what they were told. Similarly, the economic sanctions that followed were portrayed as part of a Western plot to keep Russia weak. Again, most Russians swallowed that narrative whole.

It's likely that Mr. Putin, a former KGB agent who looks at almost everything through a Cold War lens, sees Russia's economic troubles the same way. The country is under assault; the West is preparing the ground for a Ukraine-style revolution in Moscow.

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That's one thing Mr. Putin and his coterie have vowed will never happen. The actions they might take to head off this perceived threat could be even more shocking than what we saw in 2014.

One sign of how quickly the ground is shifting in Moscow is that even dark political humour is growing old fast.

There was a joke going around Moscow in early December that went something like this: What do Vladimir Putin, the oil price, and the ruble have in common? All will hit 63 in 2015.

The ruble and the oil price have already plunged right through that supposed basement.

There's another number the Kremlin boss is said to follow as closely as the oil price and value of the ruble: his personal popularity among Russians. At the start of December, before the ruble began to plunge in earnest, Mr. Putin's approval rating was still over 80 per cent, fuelled by public support for Russia's stand toward Ukraine.

If that figure starts to fall as fast the other two, all bets are off about what Mr. Putin might do when he, too, hits 63.