Since Vladimir Putin’s official return to power in 2012, the Russian President seems to have set his mind on teaching the rest of the world a few simple lessons. First, that he shall not be underestimated on the international stage; second, that Moscow will keep reasserting control over what it considers to be its legitimate sphere of influence for Russia; and finally, that he shall do whatever he pleases at home. To convey his message, Putin has supported a murderous dictator, lectured the U.S. about multilateralism, blackmailed his neighbors into accepting Moscow’s ironfisted embrace, inflamed anti-American and anti-gay sentiments, and brutally cracked down on dissidents.

(MORE: Putin Eases Protest Ban Ahead of Sochi Olympics)

From Syria and the Snowden saga to blatant human-rights violations and, most recently, pressuring Ukraine’s leadership into a sudden change of heart on its association with the E.U., Putin has managed to bedevil the West all year long. His latest clemency decision for some prominent critics of the regime, only two months before the Olympics in Sochi, lacks credibility; it is an arbitrary reflection of being at an autocrat’s mercy, not an act of mercy under the rule of law.

When it comes to the honorable title of Bully of the Year, the Russian President surely triumphed in 2013. But all too often bullies fail with their homework. Russia’s economy is crumbling. Moscow revised downward its economic outlook in December, the fourth time it did so last year. Growth, investment and industrial output are all below previously set targets, while inflation has risen to above 6%. This is not a short-term disturbance only, but the sign of the chronic shortfalls of a centralized and corrupt state. Russia seems to have completely misread the scale and pace of the energy revolution, and its overdependence on natural resources has now become an imminent threat to its economy.

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Crony capitalism and the heavy hand of the state has led to steady brain drain among the educated Russians needed for any real economy to thrive. Sclerosis persists in the public sphere as well, with everything from the health care system to the vaunted Russian army falling to pieces under the weight of graft and neglect. The cash reserves, now dwindling after being built by years of record energy prices, go to internal security and propaganda, hardly the budget priorities of a confident leadership.

And what is really happening to Russia’s standing in the world? It might be impossible to ignore Putin, but his behavior has hardly earned him any new friends — quite the contrary. A somewhat overlooked aspect of the contest over Ukraine is the role Berlin has played in it. Germany is the country that has often emphasized the importance of building bridges to Russia, and has come up with policies like “change through rapprochement.” But by now, Putin’s zero-sum game mentality and hard power push have provoked even the otherwise not-so-confrontational German Chancellor to take action. Germany has embraced the cause of Ukraine’s association with the E.U., it has offered to provide medical treatment for the imprisoned politician Yulia Tymoshenko, and its Foreign Minister traveled to Kiev to meet with demonstrators. While scoring a probably Pyrrhic victory, Putin has alienated an important partner. Ironically, he also achieved what no pleas from the U.S. President or fellow European leaders could do: Germany finally assumed leadership on a difficult foreign policy issue.

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Moreover, Putin also made the E.U. look much better than it otherwise does these days. On first sight, the E.U. Association Agreement is a remarkably boring document, whose benefits only become evident in the long term. Yet its adoption has become synonymous with signing up for democracy, the rule of law and economic progress. We have gotten all too used to popular protest against the E.U.’s undemocratic power grabs, to politicians likening Brussels to the Moscow of the Soviet era and to discussions about different countries’ potential exits from the grand European project. Ukrainians have now reminded us of the transformative influence that the always too slow and never too effective E.U. can still have on young democracies.

Whether they are real successes or not for Putin, recent events should serve as a wake-up call for leaders on both sides of the Atlantic. The U.S. should return to long-term and extensive foreign policy planning. The primary reason for Putin’s self-aggrandizing behavior is the astonishing leadership vacuum in the world. Washington’s recent preference to let other nations, including Russia, lead on international affairs has eroded the U.S.’s authority. However, the U.S. seems to slowly realize now that to influence Putin it must speak his language, that of power. Still, it has to use the right tools. The Magnitsky Act, designed to punish Russian officials for human-rights abuses, is one of the available tools, but so far Washington seems to lack the will to use it.

As for Europe, it finally seems to recognize that it needs to be capable of taking care of its own neighborhood. The frozen conflicts in the post-Soviet space have been ignored for far too long. Why did it take a war in Georgia to realize that Tbilisi required more assistance from Europe? Why did it come as a surprise that Armenia, a country on the brink of an open confrontation with Azerbaijan, could be ruthlessly pressured into anything by Russia as long as Moscow is the one providing for its security? Will it now be spurred by another country retreating from the Eastern Partnership program, or will the E.U. face the problem of how vulnerable the Transnistria conflict makes Moldova?

Russia’s behavior toward Ukraine might hand Europe an opportunity to become more united and effective in its foreign policy. This would not be the first time Putin’s aggressive policies backfired. One of the most remarkable achievements of the E.U. recently is how it has learned to stand up against Gazprom’s monopolistic practices. A few years ago, the E.U.-Russia energy relations were all about the former’s defenselessness. Today, the news is about raids in Gazprom’s European offices, the European Commission’s plans to try the energy giant in an antitrust case and most recently, Brussels’ calls for the renegotiation of Gazprom’s bilateral agreements. As a result, it is now Gazprom that has started working toward a settlement with the E.U.

(MORE: Putin’s Latest Moves Tip the Balance of Power Toward Russia)

In 2006, observers and leaders inside and out of Russia expressed doubts as to the true nature of Putin and what he was creating. Now those doubts seem to be gone: for many, Russia has moved from the domination of one party to the despotism of one man. And yet on Jan. 1, 2014, Russia became the chair of the G-8, the group of the world’s major industrial democracies, despite being neither a functioning democracy nor an industrial economy. The remaining seven governments must ask themselves why they embrace an unacceptable status quo.

The past few weeks of headlines out of Russia should also serve notice to those who claim that Putin’s repression has at least come with the benefits of predictability and stability. The sudden and unexplained release of Mikhail Khodorkovsky, the institution of martial law around the Sochi Olympics region, the twin terrorist bombings in Volgograd — these are not the signs of a stable and reliable environment. Disconnected from the people, every authoritarian government inevitably faces challenges beyond its ability to respond and to produce a positive agenda. This unmooring often leads to the creation of scapegoats and enemies and to increasingly erratic behavior.

Another recent move by Putin illustrates quite well his priorities and outlook for the future. On Dec. 9, he suddenly announced the dissolution of the state news agency RIA Novosti and the formation of a new, apparently strictly propaganda outlet. This is an additional step down the spiral of despotism: when reality does not conform to the needs of the people, produce more propaganda to convince the people that reality is not real. However, in this era of Internet and globalization, the truth cannot be hidden for long.

The recent events in Kiev should caution us against assessments that put policy over principles and attempts to stand in the path of history for the sake of a more comfortable present. The massive pro-E.U. crowds in Ukraine serve as a perfect example to the Kremlin and its beleaguered subjects that there is no genetic condition called immunity to democracy. How will the E.U. and the U.S. react to the — probably inevitable — rise of the Russian people? Let us hope they are not too meek to stand up for the universal values on which they were founded.