Let's see how to understand this.
1. We have power, although limited.
We know from experience that we are not gods. We can hardly control our own life, let alone create universes. This means that we are separate from God in the amount of power given to us.
2. We are like God
ममैवांशो जीवलोके जीवभूत: सनातन: ।
The living entities in this conditioned world are My eternal fragmental parts.
So he's established that we're eternal parts and parcels of Krishna. This means that we inherit several qualities from him. These qualities can be listed as follows:
- Eternity
- Consciousness
- Self-Identity
- Free-will
Caitanya Mahāprabhu describes this oneness and difference as Acintya-Bheda-Abheda - Inconceivable Oneness and Discordance.
While we come from Krishna and everything's controlled by Krishna, Krishna has given us 'buddhi' to choose. Buddhi (intelligence) is subtler than the mind (manas) and has been given to us to make wise decisions that take dharma or morality in consideration.
दैवी ह्येषा गुणमयी मम माया दुरत्यया |
My divine energy Maya, consisting of the three modes of nature, is very difficult to overcome.
This is how, even though he is the supreme controller of all the reality and can do anything and everything, he allows us free will in this material world but the Maya is controlled by him alone. We just have the free-will to react freely to the situations that we encounter.
विष्टभ्याहमिदं कृत्स्नमेकांशेन स्थितो जगत् ॥
With a single fragment of Myself I pervade and support this entire universe.
Since Maya or this material world is just one of his energies, he allows us to react to this energy in our own individual way. This world is sustained only by a small fragment of his power, as such, he chooses to give us free will and at the same time control us all.
मामेव ये प्रपद्यन्ते मायामेतां तरन्ति ते ||
But those who surrender unto Me cross over it easily.
Krishna has chosen to create entities that have free-will. Entities whose reactions are not under his control, unless they specifically give up all the fruits of their actions and surrender themselves to his power alone.