CAMBRIDGE – When Russian President Vladimir Putin meets his American counterpart, Donald Trump, at this week’s G20 summit in Hamburg, he will not be doing so from a position of economic strength. To be sure, despite the steep drop in oil prices that began three years ago, Russia has managed to escape a deep financial crisis. But while the economy is enjoying a modest rebound after two years of deep recession, the future no longer seems as promising as its leadership thought just five years ago. Barring serious economic and political reform, that bodes ill for Putin’s ability to realize his strategic ambitions for Russia.

Back in 2012, when Putin appeared onstage with the Nobel laureate economist Paul Krugman at a Moscow bank conference, Russia’s 1998 economic crisis seemed a distant memory. With oil prices well over $100 a barrel, the government’s coffers were bursting. So Putin could proudly contrast Russia’s government budget surplus with the large recession-driven deficits across the West. He surely delighted in having Russian audiences hear Krugman’s view that Western democracies had come up badly short in handling the global financial crisis.

In a different session, Russian academic economist Sergei Guriev (who later had to flee the country) argued that there was no hope for diversification of Russia’s resource-based economy as long as institutions such as courts were so weak. Too many key decisions rested with one man. Speaking in the same session, I emphasized that without fundamental reforms, a sharp drop in global energy prices would create profound problems.

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