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2008 started with great expectations for the country's future as the Kremlin engineered a seamless political transition from Vladimir Putin to Dmitry Medvedev. Medvedev was elected to implement Putin's Plan -- a strategy of rapid economic modernization through 2020 that would wean the country from its dependence on oil and other commodities and make innovation the driving force of the economy. Russia needed only 20 years of peaceful, undisturbed development to make a breakthrough, Medvedev proclaimed in early 2008.
That prospect faded in August, when Georgia invaded South Ossetia. Medvedev responded with a strong show of force and moved to recognize Abkhazia and South Ossetia as independent states, a move denounced by all major powers.
Suddenly, Moscow was facing global isolation and pressure. By October, Russia discovered the truth in the old saying that if anything can go wrong, it will. The price of oil fell from a high of $147 a barrel in July to less than $40 a barrel in December, sending the country's trade balance and the budget into deficits, the ruble into devaluation and the economy into recession.
Medvedev's presidency is changing from the management of a modernization policy to the management of an economic collapse. The financial crisis is also testing the viability of the Putin-Medvedev "tandemocracy," as painful, unpopular decisions need to be made to save the country. The two centers of power promised a gradual evolution of Russia's political system toward more pluralism and public accountability.
The crisis is now changing the dynamics and the direction of this process, as Medvedev's own center of power has been too slow in developing while Putin, exercising ultimate authority, is wary of taking full responsibility for crisis management.
It is now an open secret that Putin has been running the government by "remote control" through his two ambitious first deputies -- Igor Shuvalov and Igor Sechin. Both wield enormous power and ultimate responsibility for managing the crisis.
Putin's White House is now the political center of gravity, while the Kremlin is gradually turning into a backwater. Nobody there seems to be in the crisis mode, with the exception of Arkady Dvorkovich, economic adviser to Medvedev. When someone as astute as Vladislav Surkov, the Kremlin first deputy chief of staff, starts holding policy meetings on U.S. President-elect Barack Obama as a political phenomenon, instead of focusing on the country's crisis, this is a glaring sign of trouble.
Vladimir Frolov is president of LEFF Group, a government relations and PR company.
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