The western conspiracy over Russia is the Russian narrative and doesn't make any sense whatsoever because if you look closely won't be able to explain why Europe opted to depend on energy from Russia when conspiring to start a conflict with Russia. In reality, the west was simply naive to believe that what worked for EU would work with Russia too and that is the peace model through inter-dependence. Why would you start a conflict with your neighbours when you depend on their wellbeing? It turns out, when the neighbours leaders don't stay in power by providing prosperity for its people the model doesn't work.
For the West, Russia is relevant as a petrol station. Russia has turned into a petrostate and unlike Norway they chose to live off it and not do much more. Russia is no contender to the west in any form. Some might blame this too on the west but it's not west that has chosen Putin.
The EU is only weak in the Energy department(that's why they actually wanted this Russia thing to work). EU has a well educated and healthy society that is going through demographics crisis, which means there will be problems related to it but it's in much much better shape than China or any other place in the world with exception to the USA.
EU/Schengen etc might end at its current form but this is not a video game and those who fail don't simply disappear. Whatever replaces EU will be like EU in different configuration because it doesn't make any sense whatsoever to have 30 smallish countries trying to do their thing without cooperating. EU might fail and become an EU sans social security and human rights.
China, on the other hand, isn't going away and will be the primary contenders to the west because during the de-industrialisation of the west they build up huge production capacity and know how on industrial production and technology and west almost completely lost it. The main problem with China is that now they are actually very close to the west to catch up on science, technology and culture and design too which would mean complete Chinese dominence. Their primary disadvantage is that they have very serious demographics issues and they are poor on energy like EU.