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Russian President Vladimir Putin attends a military parade to mark 70 years since the city's liberation by the Red Army in Belgrade October 16, 2014.MARKO DJURICA/Reuters

He's a villain in the eyes of the West, targeted by economic sanctions and rhetoric comparing him to Hitler. But Vladimir Putin's popularity among Russians continues to rise – even as the value of the ruble is plunging and the country's economy is on the verge of recession.

Nationalism, so far, is trumping economic concerns.

The ruble is in a free fall, losing more than a third of its value in the past 12 months. Where it cost 31 rubles to buy one U.S. dollar this time last year, and the ruble traded at 33 to the dollar as recently as January's Winter Olympics in Sochi, it cost just over 41 rubles on Thursday to buy a dollar at the banks that line Tverskaya Street, Moscow's main commercial drag.

Bruised by the 1998 financial crisis, when Russians saw the ruble – and the value of their savings – plunge by 70 per cent during a traumatic six-month period, Russians have appreciated the economic stability Mr. Putin has delivered since 1999. The value of the currency has held steady at somewhere below 30 rubles to the dollar for most of his 15 years as either the country's president or prime minister. Mr. Putin's approval ratings remained above 60 per cent all that time.

Since March, Canada, the United States and the European Union have imposed mounting sanctions in response to Moscow's actions in Ukraine – and Russia's already wobbling economy has responded by sliding further toward recession. Gross domestic product grew just 0.8 per cent in the second quarter of this year.

But Mr. Putin's popularity nonetheless continues to hit new heights. A whopping 86 per cent of Russians told the independent Levada Centre this month they approve of the job their President is doing.

The old logic used to be that Mr. Putin was popular because, on a practical level, life was getting better – or at least, more predictable – under his rule. Western media and human-rights groups might fret about diminishing freedoms and growing autocracy in Russia, but the average Russian was more focused on rising salary and pension levels.

That is still the case, said Lev Gudkov, the director of the Levada Centre. But at some point, they will reach the tipping point. "In a year, we will feel all the results of what is happening now and it will be a very serious social situation," he said.

The plummeting ruble is more the result of world oil prices, which have fallen almost 20 per cent this year, than the Western sanctions. (Oil exports account for more than 50 per cent of Moscow's revenues.)

More directly tied to the sanctions – and of greater concern to the average Russian – is galloping inflation in the country, which hit a three-year high of 8 per cent last month. While Western measures are focused on specific individuals and industries tied to Mr. Putin, the Kremlin hit back this summer by imposing a broad ban on agricultural imports from Canada, the U.S. and the EU.

That's led to shortages of foreign foodstuffs, particularly outside Moscow and St. Petersburg, a void that domestic farmers are scrambling to fill. The official Rossiskaya Gazeta newspaper reported last week that the government may move to price controls on certain "socially important" goods.

Asked by pollsters whether they were willing to sacrifice imported foods – and live with higher prices – in order to support the government's stance in Ukraine, the large majority of Russians say yes. But Mr. Gudkov says he's not sure that will be the case in a few months' time.

"Prices are increasing so fast right now that everyone's noticing. When it's summer, it doesn't feel so bad, but by November, the mood will change a lot. November is always a very depressing month, even without the sanctions."

A decade of high oil prices has left the Kremlin with $454-billion (U.S.) in foreign-currency reserves (before the ruble intervention began), a war chest that can be used to stabilize the currency and subsidize food prices. Many experts believe the Kremlin can fight off economic collapse for about 18 months before it starts running out of tools. That's enough time, Moscow is wagering, to reach its aims in Ukraine and start moving toward détente with the West.

The Kremlin has already begun eyeing its preferred endgame. Mr. Putin and Ukrainian President Petro Poroshenko agreed to a ceasefire last month that – if it holds – would leave pro-Russian rebels in control of swaths of southeastern Ukraine, an area they call "Novorossiya" or "New Russia."

A Moscow-backed mini-state akin to Trans-Dniester in Moldova, or Abkhazia and South Ossetia in Georgia, has effectively been born. Kiev has also agreed to defer implementation of its trade agreement with the European Union until 2016, and NATO membership for Ukraine – a red line for the Kremlin – is farther away than ever.

Mr. Putin and Mr. Poroshenko are set to meet on the sidelines of a Europe-Asia summit that began Thursday in Milan. Mr. Poroshenko will be looking to sign a permanent ceasefire deal and convince Mr. Putin to resume sales of Russian gas to Ukraine, which Russia's Gazprom suspended in June, citing $4.5-billion in unpaid debt. Ukraine could be looking at a very cold winter if hostilities between the two governments continue, and Western Europe could face shortages too, if Ukraine copes – as Kiev allegedly did during a 2009 dispute – by siphoning some of the Russian gas that transits its territory on its way to the EU.

Mr. Putin will likely be looking for signals the West is willing to end, or at least suspend, key sanctions before he does Mr. Poroshenko any favours. He holds not only the gas card, but the ability to restart the fighting in Donetsk and Lugansk.

If the aim of Western sanctions was to change the Kremlin's behaviour in Ukraine, they appear to have spectacularly failed. Mr. Poroshenko looks set to effectively concede Russian control over Crimea, and to tolerate a breakaway "Novorossiya" as the price of peace and a resumed supply of natural gas.

But if the goal is to encourage Russians to rise up against Mr. Putin's 15-year-old rule, all sides need to get ready for a longer confrontation.

"I think the sanctions are a big miscalculation on the Western side," said Fyodor Lyukyanov, editor-in-chief of the foreign policy journal Russia in Global Affairs. "If the non-declared aim is to weaken the Russian economy and to provoke some crisis and through this weaken the regime and help anti-Putin forces … this might work in the middle term or longer term."

"But if the aim is to change Russian strategy on Ukraine, the result [of the sanctions] will be exactly the opposite."