
It may seem that Russia's political scene has finally stabilized. But tensions persist and permeate the highest levels of government and structural economic factors cannot be counted on to favor the Russian establishment.

Putin's economic agenda offers only more of the same heavy-handed policies that have failed to modernize Russia and made the country more vulnerable to external shocks.

Russia faces serious economic challenges, including a demographic crisis, corruption, weak enforcement of property rights, and over-reliance on hydrocarbons. A combination of structural political and economic reforms is required to save the country from stagnation.

The political turmoil in Russia, though not directly affecting the economic landscape, could expose vulnerabilities in the Russian economy if nervous foreign investors continue to retreat.

Tens of thousands of Russians took to the street in protest over voter fraud allegations in the country’s parliamentary elections. It remains to be seen what this public response and the election results will mean for the country’s future.

Almost two decades after negotiations began Russia is set to join the World Trade Organization. Russia, the biggest country to enter the WTO since China joined ten years ago, is expected to be confirmed as a member during the ministerial meeting in mid-December.

Russians should not expect modernization to be initiated from the top. Nor can a modern economy develop in Russia without reforming its political institutions, such as elections, the courts, and the law enforcement agencies.

When Vladimir Putin reclaims Russia’s helm in 2012, he will have to manage an economy that has lost its momentum and is approaching stagnation. Falling oil and gas revenues will only make his job more challenging.

Russia’s next president must improve financial regulation and reduce the country’s dependence on oil revenue in order to prevent economic growth from deteriorating in the coming years.

Russia’s recovery from the global economic crisis has been slow, constrained by a number of economic and political structural problems. Until they are resolved, these issues will continue to hinder Russia’s development.