In June 2008, even as the world economy began to crumble, Russian Prime Minister Vladimir Putin was sanguine about his country's economic prospects. "We have no crisis," he said. For the moment, he was on top of it all. Russia's economy had grown by seven percent every year from 1999 to 2007, and Putin was predicting that it would surpass Germany as the fifth-largest economy in the world by 2020.
This, however, would soon prove to be an illusion. At first, Putin and his allies in the Kremlin continued to act invincible, either in denial or opportunistic about the threat the crisis posed. But as the crisis deepened, more liberal figures close to President Dmitri Medvedev were able to push through an initial round of much-needed economic policy adjustments. The third phase of the Russian response will become clear over the next few months, as the Kremlin chooses either to continue down the path of reform or to halt structural changes.
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