His popularity remained high, even when he stepped aside to become premier in 2008 because of constitutional limits and ushered Medvedev into the Kremlin , but his relations with West have long been prickly.
This is perhaps not surprising, given his own remark: "There is no such thing as a former intelligence officer." Former U.S. Secretary of State Colin Powell said that when he looked into Putin's eyes, he saw KGB.
But Putin's touch deserted him with the announcement on September 24 that he and Medvedev would swap positions this year.
"There were a lot of nice ways for Putin to return but this arrogant, undemocratic job swap alienated so many people, even their own followers, that his ratings started to fall," said Ilya Ponomaryov, one of the protest organizers.
Putin's standing slid further among urban middle-class voters when allegations of fraud emerged after the December 4 election won by his United Russia party.
Initially Putin sought to mock and insult the protesters who took to the streets. He has since held out an olive branch but has not met the protesters or granted any of their key demands.
HOLDING ON TO POWER
To hold on to power, Putin will need to keep the support of the influential political, security and business elites.
There have been no overt signs that he has been abandoned by any of those constituencies although conflicting signals towards the media - glimpses of a more liberal approach accompanied by a backlash against outlets that criticize him - could point to differences of opinion behind the scenes.
Some political analysts say he will have to make concessions to the protesters - perhaps allowing Medvedev only a short time as prime minister before replacing him with a liberal such as Alexei Kudrin, a former finance minister respected by the West.
Another possible concession would be to call an early parliamentary election. This could pave the way for a parliament that offers real opposition for the first time in years as United Russia recedes or becomes defunct.
If he goes too far, too quickly, Putin risks alienating conservatives happy with the status quo.
"He's going to move very gradually towards a more liberalized society but he has to watch his back because some of his people want a crackdown," said Vladimir Pozner, a veteran television journalist and commentator.
"I am not foreseeing 12 more years of Putin anyway. I am seeing a maximum six, but perhaps not even that."
If that happens, Putin may want to groom a successor to grant him immunity from prosecution, just as he did for Yeltsin in one of the first moves of his acting presidency 12 years ago.
(Additional reporting by Jennifer Rankin and Maria Stromova; editing by Elizabeth Piper)
