In 2014, the battle for Europe’s future has been fought between two leaders: Russian president Vladimir Putin and German chancellor Angela Merkel. The contrast between them could not be sharper. There the Russian man: macho, militarist, practitioner of the Soviet-style big lie (Russian soldiers in Crimea? What soldiers?), a resentful post-imperial nationalist who in a recent press conference compared Russia to an embattled bear. Here the German woman: gradualist, quietly plain-speaking, consensus-building, strongest on economic power, patiently steering a slow-moving, sovereignty-sharing, multinational European tortoise. 19th-century methods confront 21st-century ones; Mars, the god of war, against Mercury, the god of trade; guns versus butter. For the first half of 2014, the bear was making the running, but now, with the Russian economy close to meltdown, it seems the tortoise may be winning after all.

Merkel has long been recognised as Europe’s leading politician, but this year, during the crisis over Ukraine, she became its leading stateswoman. I remain critical of her handling of the eurozone crisis, but I have only admiration for how she has addressed the return of war to European soil on the hundredth anniversary of 1914.

At the beginning of this year, German president Joachim Gauck, an east German Protestant, took up the appeal that other Europeans had already made for Germany to assume more leadership responsibility in Europe. In the course of the year, Merkel, an east German Protestant, has answered that appeal. The eastern half of Europe is her world. She has it in her bones. She understands it.

One of the early influences on her was a teacher of Russian. As a schoolgirl, she won East Germany’s Russian-language Olympiad. On her office wall, she has a portrait of Sophie von Anhalt-Zerbst, the Pomeranian princess who became Empress Catherine the Great of Russia. She can speak to Putin in Russian, as he can to her in German.

Both were in east Germany in 1989 – he as a KGB officer, she as a young scientist – and the lessons they drew were diametrically opposed. In domestic politics she can appear the perfect tactician, tacking this way and that, ruthless as Catherine the Great in seeing off challenges to her power. But in this European crisis, two profound, personal commitments of a Protestant east German of her generation have come to the fore: to peace and to freedom.

In a powerful speech delivered in Sydney last month, she excoriated what Putin has done in Ukraine, referring back to the shared experience from which the two leaders drew such different conclusions: “Who would have thought it possible that 25 years after the fall of the Berlin Wall … something like this could happen in the middle of Europe? Old thinking in terms of spheres of influence, whereby international law is trampled underfoot, must not be allowed to prevail.”

Earlier in the same speech, she reflected on the lessons of 1914. She has thought hard about the argument made by the historian Christopher Clark in The Sleepwalkers, his masterly account of how Europe stumbled into the first world war. If European leaders went sleepwalking 100 years ago, they must learn the lessons of history and wake up to the danger today. That is why she has talked to Putin more than any other world leader has: 35 phone calls in the first eight months of this year, according to figures released by the Kremlin. (Tellingly, she is also the world leader to whom the American president has spoken most often.)

As she never tires of repeating, her strategy has three prongs: support for Ukraine, diplomacy with Russia and sanctions to bring Putin to the negotiating table. To see Germany leading the way in economic sanctions against Russia is extraordinary. In the early 1990s, I wrote a history of West Germany’s Ostpolitik, culminating in German unification, and the first commandment of that Ostpolitik was that eastern trade should always go on. Sanctions were called for by the US and resisted by Germany. Today, Germany has more trade with Russia than any other European power. Its energy, machine-tool and other eastward–oriented businesses form a powerful lobby, not least within Merkel’s own Christian Democratic Union. Yet she has taken them down the path of sanctions.

Of course Putin and the Russian separatists in eastern Ukraine helped, especially with the shooting down of a Malaysian airliner in July. But, unlike in the eurozone crisis, she has led rather than followed German public opinion. She has faced down the so-called Putinversteher – those who show such “understanding” for Putin’s actions that they come close to excusing them. She has made the larger arguments, from history, about Europe, and they have resonated. I was particularly impressed by an interview I read with the boss of a German machine-tool company whose exports to Russia have been roughly halved following the imposition of sanctions. Yet this German industrialist said he fully supported them: “If [Neville] Chamberlain had imposed some sort of sanctions on Hitler, things would have been different. Both Hitler and Putin held their Olympics, and after his Olympics, Hitler went to war.”

What is more, she has made the case for sanctions powerfully to more reluctant members of the EU, notably Italy, but also smaller east European countries where Russia wields much influence. To be sure, the formal chair of last week’s European Council was the former Polish prime minister, Donald Tusk. It is a notable day in European history when a Pole speaks to Russia not just in Europe’s name but with the whole economic and political weight of a European Union behind him. But Tusk is Merkel’s trusted ally. Everyone knows she is Europe’s real chair. In her Sydney speech, she again emphasised the vital importance of European states “speaking with one voice”.

And then she has been lucky – an essential attribute for any successful stateswoman or statesman. (I can’t bring myself to write statesperson.) Without a spectacular fall in the price of oil, the sanctions, which are still patchy, and not supported by China and other important economic partners of Russia, would not have had this dramatic impact.

The battle of Europe is far from over. In Russia itself, deepening economic crisis will not necessarily translate into more accommodating policy. There is no route map to a post-Putin regime. The cornered bear may lash out. In the bloodied fields of eastern Ukraine, there is still the risk of a series of 1914-style miscalculations leading to an escalation. Russian military planes have flown into the air space of Baltic Nato members.

Nato’s article 5 says an attack on one is an attack on all, but what, in the 21st-century, is an attack? As the apparent North Korean hacking of Sony’s computers has reminded us, cyberattacks are not like uniformed infantry divisions marching across a well-marked frontier. What if Putin sends some more unacknowledged “little green men” to stir up trouble among ethnic Russian minorities in the Baltic states?

So these are still perilous times, and 2015 may bring even larger challenges. But as 2014 draws to a close, I have no hesitation in concluding that Angela Merkel has been the stateswoman of the year.