Russia is both a tragedy and a menace. In the Financial Times this week Sergey Karaganov offered an arresting insight into the blend of self-pity and braggadocio currently at work in Moscow. It is as depressing as it is disturbing.

Western policy makers seem to believe the Islamic State of Iraq and the Levant (known as Isis) is the greater danger. But Russia is the nuclear-armed rump of a former superpower and, ruled by an amoral autocrat, it frightens me even more. For Europe and, I believe, the US, there is no greater foreign policy question than how to deal with today’s Russia.

The west "proclaimed itself victor in the cold war", according to Mr Karaganov. Maybe the origin of the tragedy can be found in this remark. The west did not just proclaim itself victor; it was the victor. A defensive alliance defeated the Soviet Union because it offered a better way of life. That is why so many wanted to escape the Soviet prison, including many once-optimistic Russians.

Yet President Vladimir Putin, the latest in a long line of Russian autocrats, has stated, instead: "The collapse of the Soviet Union was a major geopolitical disaster of the century."

It was, in fact, an opportunity, one that many in central and eastern Europe seized with both hands. The transition to a new way of life proved unavoidably difficult. The world they now inhabit is highly imperfect. But they have mostly joined the world of civilised modernity. What does this mean? It means intellectual and economic freedom. It means the right to engage freely in public life. It means governments subject to the rule of law and accountable to their people.

The west has too often failed to live up to these ideals. But they remain beacons. In the early 1990s they were beacons to many Russians.

As a great admirer of Russian culture and Russian courage, I hoped, fondly perhaps, that the country would find a way through the debris of its collapsed ideology, state and empire. I knew it would be difficult.

I wanted Russia to choose western values, however, not just for our sake but also for its own. The alternative of continuing the cycle of despotism was too depressing.

With the selection of Mr Putin, a former KGB colonel, as his successor, Boris Yeltsin delivered that outcome. The president may, for now, be a popular despot. But a despot he is. He is also heir to the project of Yuri Andropov, former KGB head and Soviet leader, for a modernised autocracy. As a loyal servant of the state, he believes results alone matter. Lies are just another tool of statecraft. Only the wilfully blind could fail to see that evident truth in recent months.

The west is partly responsible for this tragic outcome. It failed to offer the support Russia needed quickly enough in the early 1990s. Instead it focused, ludicrously, on who would pay the Soviet debt. It acquiesced in the larceny of Russian wealth for the benefit of a few.

But more important was the refusal of Russia’s elite to address the reasons for the collapse, then to start afresh. Only by confronting the reality of Stalin’s monstrous machinery of oppression and lies could they build something new.

The nation that has emerged was always the likely outcome. It sees itself as surrounded by enemies. Foreign relations are zero sum; success for others is a failure for Russia.

Survival In this view, a prosperous and democratic Ukraine, if achieved (a remote possibility, I agree), is a nightmare. For Moscow’s elites preventing that is, as Mr Karaganov puts it, “a struggle to stop others expanding their sphere of control into territories they believe are vital to Russia’s survival”. And who is it that, allegedly, threatens Russia’s survival? It is a west that is “weaker than many imagine”. Such a feeble west plays the part of bogeyman.

Viewed from Moscow, western policy is the politics of Versailles. In fact, the western position is based on two simple principles: first, a country is entitled to make its own choices; second, borders may not be changed by force.

Russia rejects both of them. It is because its former satellites and dependencies were rightly confident that Russia would not accept these principles that they have been so keen to join Nato.

The military alliance did not have to force them to join. They begged to do so. Maybe they understand how broad is Russia’s understanding of its “vital interest” and how ruthless it is in protecting them.

At times the outlook among Russia’s elites borders on parody. One reason many in Moscow believe that a political union with Europe is impossible is that Europe is abandoning Christianity and “traditional” norms – for which read acceptance of homosexuality. But I, at least, remember that the Soviet Union whose disappearance Mr Putin bewails persecuted Christianity mercilessly. One might remember, too, that Russia’s elite love this western den of iniquity.

Absurd “I bully; therefore I am.” That appears to be the motto behind some of the president’s outbursts. But they are no less serious for being absurd. The west is not a threat to Russia. On the contrary, the west knows very well it has a vital interest in good relations with the country.

But it is not so easy to ignore an invasion and, yes, that is what it is, however much one might dislike the word. At the same time, an adversarial relationship with a power as important and potentially helpful as Russia is grim.

Is there a solution to this quandary? All possibilities – further sanctions, massive economic and possibly military assistance to Ukraine or doing nothing at all – carry risks.

But the west has to start from an honest reckoning of the Russia it now has to live with. Today’s Russia feels it is the victim of a historic injustice and rejects core western values. It also feels strong enough to act. Today’s Russian leader also sees these potent emotions as a way to secure power. He is not the first such ruler. His Russia is a perilous neighbour. The west must shed its last post-cold war illusions. martin.wolf@ft.com Copyright The Financial Times Limited 2014