And this is a grand disappointment, even a frightening prospect? The elevation of Putin­a secret deal promoted by Yeltsin's personal and political family, motivated less by patriotism than self-preservation­will go down as one of the most enduring aspects of Yeltsin's shaky legacy. Now, Putin, just like his benefactor, has selected his successor, Russia's new president Dmitri Medvedev. Sure, Putin has no plans to retire to a hospital-dacha, where Yeltsin had spent much of his presidency. Still, in his crafty way Putin has abided by the constitutional limit of two presidential terms. In May, Medvedev will acquire the immense powers of the Russian presidency (a gift of Yeltsin) in circumstances whereby the Russian state is no longer incoherent (a gift of Putin). And this is grounds for near universal dismissal in the west?

Two clashing myths have opened a gulf of misunderstanding towards Russia. First is the myth in the west that the chaos and impoverishment under Yeltsin amounted to a rough democracy, which Putin went on to destroy. When something comes undone that easily, it was probably never what it was cracked up to be. Still, the myth of Russia's overturned democracy unites cold war nostalgists, who miss the enemy, with a new generation of Russia-watchers, many of whom participated earnestly in the illusory 1990s democracy-building project in Russia and are now disillusioned (and tenured).

Second is the myth, on the Russian side, that the KGB was the one Soviet-era institution that was uncorrupted, patriotic and able to restore order. This credits Putin's stooge entourage for the economic liberalisation that was actually pushed through by the non-KGB personnel around him.

Each of these myths deeply rankles the other side. When a big majority of Russians accept or even applaud Putin's concentration of power, Anglo-American observers suspect not just ignorance but a love of authoritarianism. (Unfortunately, Russians have never been offered genuine democracy and the rule of law alongside soaring living standards.) When foreign-based commentators and academics celebrate Yeltsin's Russia, which was worth a paltry $200bn and suffered international humiliation, while denouncing Putin's Russia, which has a GDP of $1.3 trillion and has regained global stature, most Russians detect not just incomprehension but ill-will.

Let's take a deep breath. To recognise that Putin inherited a dysfunctional situation derived from rampant insider theft and regional misrule is not to condone his KGB-style rule, which has often been nasty and sometimes self-defeating. Even though many Russian officials are conscientious and competent, the state remains too corrupt, as in most places around the world. At the top, privileged functionaries have grabbed (and are still grabbing) prime business holdings. At all levels, officialdom now seeks its rewards by mimicking the Kremlin's repression and manipulation. But Russia is also increasingly prosperous, with a new consumer-driven market economy and a burgeoning middle-class society full of pride. This combination of a relatively closed, unstable political system and a relatively open, stable society may seem incompatible­but there it is.

What happens when a large, important country turns out to have a dynamic, open market economy integrated into the global system, yet a political system that is undemocratic and not democratising? A lot of head-scratching by experts. It may be comforting in the corridors of punditry and social science to write about how economic growth without the rule of law is doomed to fail (China?) or how economic growth eventually brings political liberalisation. But many countries, not just Russia, have more or less manipulated elections while lacking the rule of law, and yet still have dynamic market economies. In Russia private property is not guaranteed­and property ownership is widespread.

A conceptual adjustment to Russia's seemingly impossible reality is now under way, but the process is painful and slow. "When I worked in Moscow in 1994 and 1995 for the National Democratic Institute, an American NGO, I could not have imagined the present situation," confessed Sarah Mendelson, a senior fellow in Russian affairs at the Centre for Strategic and International Studies, in the American Scholar recently. "We thought we were on the frontier of a democratic revolution. We weren't. We were witnessing a market revolution." This basic understanding, so long in coming, is not yet widespread. For the most part, pathetic cries about how "the west," whatever that is, has (again) "lost" Russia, and how the west must somehow "resist" Putin, persist....

The unsolved murders of Russian journalists and the arrests of political activists make many observers want at a minimum to chalk up Putin's boom to dumb luck­floating on highly priced reservoirs of oil and gas left by nature hundreds of millions of years ago­and to predict a come-uppance. Maybe Russia is set for a fall. In terms of quotidian state functions, Russia is badly governed, which makes it vulnerable in a crisis. In a global world where everything is connected, if China's boom loses air, Russia too will feel the enormous downdraught. And Wall Street's financial engineering may yet annihilate everyone, good and bad alike. Whatever the future holds, it is clear that the world has not seen such large authoritarian market economies like Russia's or China's since, well, Nazi Germany and its ally Japan. But today's authoritarian Russia and China are not militarily aggressive. And Edward Lucas notwithstanding, these countries are also not likely to be defeated in war and occupied so that the likes of Michael McFaul and Kathryn Stoner-Weiss can have another go at the democracy crusade so well chronicled by David Foglesong.

The power of the Kremlin can seem all-encompassing. Across the 20th century, the average time in office for leaders in the democratic US has been about six years. In autocratic Russia, it has been around ten. Remove Stalin's long despotism, and the figure falls to eight. Still, authoritarian successions are always difficult from a regime's point of view. (Perhaps the most remarkable fact about China is not its market transformation but its two smooth, albeit opaque, political transitions after Deng Xiaoping stepped down, first to Jiang Zemin and then to Hu Jintao.) One of the many weak points of authoritarianism is that it makes bad options appear attractive­like hoping, as many do, that Putin remains Russia's real ruler. But whatever the fate of the latest succession, the Kremlin's China-like strategy will likely continue: suppressing many of the politically liberalising aspects of globalisation while pursuing its economic aspects to the ends of the earth.

Just like the Chinese and the Arab autocracies, the Russians are coming­and for real this time. When Russian capital, already highly visible in Europe and Britain, comes with ever greater force to Wall Street and to Main Street America, will Americans understand the value of Russia having a substantial stake in US success? Will Americans appreciate that having Russian-owned assets on American soil that could be seized provides a huge source of leverage over the Kremlin that is today lacking? As for the EU, it may be crucial for north Africa and the Levant, but it is far less so for Russia (or China). The EU seems likely to be bedevilled for some time over the status of Turkey, while Russia, just like China, continues to pursue bilateral relations with individual European countries. Russia's trade with EU countries is huge­three times its trade with the former Soviet republics­and Germany is easily Russia's biggest single partner (in 2007 their bilateral trade hit $52.8bn). Still, right now no place matters more to Russia than London as a commercial hub of globalisation. London's importance is one reason Russia has tried­with episodes like the British Council harassment­to send forceful diplomatic messages over anything related to its sovereignty, just as China does, without undermining real interests.

We should not, however, exaggerate Russia's global power. In future the US, the EU and China will each account for no less than one fifth of global GDP. Even if Russia does become the world's fifth largest economy, it would still constitute no more than 3 or so per cent of global GDP. The Kremlin will use its seat on the UN security council and presence at the G8 to defend its interests globally, while also seeking good relations with China in various forums. But Russia is not an EU country, not a US ally and not a China ally. It is perceived as a possible partner, but also as a potential enemy, by all three. Above all, if Russian companies, whether state-owned or private, are not able to go toe-to-toe with the best companies in the world, you can forget the whole game. "Even with the economic situation in our favour at the moment, we are still only making fragmentary attempts to modernise our economy," Putin said in a speech this year on Russia's long-term development strategy to 2020. "This inevitably increases our dependence on imported goods and technology, and reinforces our role as a commodities base for the world economy." He added that "the Russian economy's biggest problem today is that it is extremely ineffective. Labour productivity in Russia remains very low. We have the same labour costs as in the most developed countries, but the return is several times lower. This situation is all the more dangerous when global competition is increasing."

In short, President Medvedev and, if so named, Prime Minister Putin have their work cut out