Even for the billionaires,there is a new fear in the air: No longer can they rely on the certainty of retaining their assets as long as they don’t oppose Putin. The arrest in September of the Russian billionaire Yevgeny Yevtushenkov, who is known for his independence, sent a clear message. “This is no longer a crisis,” says one banker for Kremlin insiders. “What we have now is a new normal. There had been a complete re-evaluation of what Russia can now achieve. We are no longer going to grow like an emerging market. We are going to be living in a country a lot more like Iran than China. They are putting nationalism above the economy.”

Russian oligarchs have been trying to convey their fears to the British government, warning advisers of Prime Minister David Cameron that further sanctions may cause Putin to lash out aggressively against the gentler parts of the Russian elite. Russian diplomats have also tried to convince their European counterparts that within the Kremlin, liberal and conservative factions are clashing and they must do nothing to strengthen the hardliners. But Bildt and others believe that such a clash, if it existed, is already over. “I don’t believe that Putin is being spun in a faction war,” says Bildt, “You must never forget that Putin belongs to the conservative faction. He is essentially a KGB security guy.”

The Putin regime has also done much in recent months to stifle the Russian media. The Kremlin brought national television under its control almost immediately after coming to power. But news sources without a mass audience were long relatively free of Kremlin meddling. The Internet was unfettered and most quality newspapers were only lightly censored. This has now changed dramatically. Russian state television is little more than agitation and propaganda. The hysterical national propagandist Dmitry Kiselyov, who heads the national news agency Rossiya Segodnya, now delivers a weekly broadcast of the government line to the population.

Draconian laws have been passed enabling the regime to arrest anyone for anything said online. The regime has invested in extensive surveillance technologies, including ones that allow it to rewrite foreign websites when seen on Russian computers. Russia is now forcing all servers covering Russian data to be relocated to its territory and then permit the intelligence services full access to them. Many Muscovites expect full censorship of the Internet soon, and they fear Facebook, Skype and Twitter will soon be banned. Meanwhile, major Russian newspapers such as Kommersant have seen their editorial freedom vanish, while others such as Vedomosti or Novaya Gazeta now believe they are under threat of closure due to a new law heavily dramatically curtailing what foreigners may own in the Russian media.

“There had been a serious step up in the propaganda front,” says Bildt. “This metaphor must not be stretched too far but what has happened reminds me of the propaganda TV established by Slobodan Milosevic in Serbia in the 1990s. Serbian propaganda TV would use traumatic historical memories again and again. … Now Russian propaganda TV does the same.”

Many in Brussels believe Putin invaded Ukraine because he feared globalization; the Internet and the rise of the middle class were eroding the foundations of his regime. “Putin found reform too difficult,” says Sikorski. “Putin has taken the shortcut to popularity. He realized that moving towards reform involved cutting through and damaging the interests of too many relevant people who his power depends on. He saw this as much too risky. But in reality his greatest fear is being [the last Soviet leader, Mikhail] Gorbachev. He sees Gorbachev as a fool because he was taken in by the West and then thrown under the bus. And there is some truth in that.”

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Russia’s internal reordering has also, not surprisingly, reoriented the Kremlin’s view of the world in dramatic ways. There is no hiding the new Cold War-like atmosphere. Nikolai Patrushev, chairman of the Russian Security Council, which oversees Russia’s security forces, made this clear when he said in October the United States is now “pursuing the same objectives they had in the 1980s towards the Soviet Union.”

This line is not lost on Brussels, where officials believe the European Union will continue to do business with Russia, but it will no longer commit to building anything with Moscow. This means that any project to build either a visa-free or a free-trade regime with Russia is now dead for the foreseeable future. This is why Putin’s new-style regime is pushing hard to cozy up with China, in particular with new huge energy deals. According to an adviser to Russian Deputy Prime Minister Igor Shuvalov, Moscow intends to slowly move the finance of state companies and political players away from London, Zurich and Frankfurt toward Hong Kong, Shanghai and Singapore. “We think we can match what we lose from the West with what China offers,” said the adviser.

European leaders find this fantastical. According to one Cameron adviser, the inner circle of the British government sees Russia’s eastern pivot as delusional. They believe that it will take decades to rebuild an entire oil and gas infrastructure oriented toward Europe and that Chinese banks are in no position to replace Western loans. “The Chinese cannot and will not give them this money,” said the adviser.

And indeed, there has been little by way of new Chinese loans toward Russian companies unable to leverage in the West. As of early September the leading Chinese state banks – the Bank of China, the Chinese Construction Bank and the International and Commercial Bank of China had lending portfolios of only $170 million in Russia. This is nothing compared to $134 billion in foreign debts Russian banks and corporations must repay to mostly American and European banks before the end of 2015.

“What we are hearing from the Chinese is an extremely cynical view of Russia,” says Bildt, “and what the Chinese can do with them. They arrive in Beijing and there is great fanfare but there is very little reality to many of these handshakes. They say we have indeed signed some contracts but this will take a very long time and we don’t even believe much of it will really happen.”

Now that the shock of war in Ukraine has faded, many in Brussels are trying to work out how far back the operation in Crimea was planned. This is why Russian diplomats are working hard to convince European leaders that the war in Ukraine was simply an unfortunate set of events starting with the spontaneous protests in Kyiv earlier this year, which led to the ouster of then-Prime Minister Viktor Yanukovych, a fickle ally of the Russian President.