On October 1939, just as the Second World War had begun, Winston Churchill stated: “I cannot forecast to you the action of Russia. It is a riddle, wrapped in a mystery, inside an enigma; but perhaps there is a key. That key is Russian national interest.”

75 years and the annexation of Crimea in March 2014 later, the situation remains the same. Angela Merkel, the German chancellor, once remarked that Vladimir Putin is living in a “parallel universe”. As people all over the world try to figure out the riddle that is Putin's mind, Churchill's key comes in handy again.

Putin’s signature style is “soft annexation”, which he used in the case of Georgia invasion and breakaway of provinces Abkhazia and South Ossetia. The idea is to use political, economic and military levers which cannot be considered a traditional invasion, and exploit ethnic conflicts in countries which were once a part of Soviet Union. The goal is to augment these tensions (seen as relics of the former Soviet Union's messy collapse) and to prevent these countries from moving closer to the West as well as gaining influence in former Soviet States.

Look through: Russia’s overtures

The annexation of Crimea was done to extend Russian influence in Eurasia and also create favorable conditions for domestic economic growth. In all likeliness, Putin will not back off from the Ukraine issue as he would consider it a sign of weakness.

Russia’s economic progress has been noticeable in the past 15 years. GDP has increased sixfold and income-per-head sevenfold. Russia has regained its position in the world's top 10 economies. Its GDP in 2007 was at the level of 1990s, indicating a comeback since the collapse of Soviet Union. In 2003, its major oil exporting firm known as Lukoil earned profits of up to 38 per cent. According to World Bank, the 2012 GDP figure was $2.015 trillion which clearly demonstrates its phenomenal growth.

And then there is Russia’s military resurgence. By 2020, the Russian army will be organized around combat-ready and easily deployable brigades, with an objective of having at least 70 per cent of these forces equipped with next-generation weaponry and equipment.

Their goal is to have, by 2020, a million active-duty personnel; 2300 new tanks; 1200 new helicopters and planes; a navy fielding 50 new surface ships and 28 submarines; and 100 new satellites designed to augment Russia’s communications, command and control capabilities.

Putin is committed to spending billions over the next decade to satisfy these requirements.

Also read: Russia’s new military doctrine cites Nato as top threat

When Putin looks towards the West today, what does he see? A United States that preached the values of capitalism narrowly avoiding economic collapse in 2008, and a Germany — Europe’s powerhouse — on the verge of recession.

So Putin is confident that he can manage to come out of the Ukraine crisis. He is probably of the view that the European powers will get tired of imposing sanctions and the economy will bounce back. In fact, this crisis is his opportunity to tighten his grip on several matters.

He is aware of China’s booming manufacturing sector. The resentment that existed between the two countries in the 1960s has diminished and a healthy rapprochement is observed. China’s model of economic development is perceived as an example of success for Russia. An example of the increasing Sino-Russian energy sector cooperation can be observed from the signing of $400 bn deal where Russian company Gazprom will deliver 38bn cubic metres of gas to China annually.

Putin has realised that his country’s strength lies in its resources and this is evident from asserting his control in the oil and gas industry.

See: Ukraine secures cheap coal, power supplies from Russia

The main problem with sanctions is that they take time to work and despite various attempts to make the Russian bear passive, the bear has awakened. The West ignores the fact that sanctions will not solve the problem of Ukraine. Russia’s neighbour requires assistance of billions of dollars to recover from the turmoil.

In the past, Russia and Ukraine had enjoyed a symbiotic economic relationship. Russia was the most important strategic trade partner of Ukraine and a vast market for Ukrainian goods. Russian financial groups held an important position in Ukraine’s economy and leading Russian companies are still operating in Ukraine; these include oil refineries (TNKBB, Lukoil), mobile companies (ALTMO) and banks (Alfa Bank).

This dependence has now come back to bite Ukraine, which now needs a substantial amount of money for it’s recovery. And this is Putin’s strength.

He is unlikely to settle for Crimea or eastern Ukraine embroiled in conflict. He desires entire Ukraine, and pursuing the stratagem of building political and economic pressure on Kiev, he believes is the key to success. Russia has remained stable, expanded its economy and enhanced its international prestige like no other in the past 15 years.

And inside Putin’s mysterious mind one thing remains certain: He will not bow to western pressure and his resolve to make Russia a power to reckon with remains strong.