The main topic of Russia’s current presidency of the Group of Eight leading industrial nations is supposed to be energy security. At the end of last year President Vladimir Putin called for a better investment climate, improved corporate governance and innovative technologies as tools to address international energy security challenges and claimed that Russia deserved a status of “fashion leader” in a new global energy architecture.

Russia’s official rhetoric is a sharp contrast with reality. Recently, its energy policies have all been about increasing state control over the energy sector, sacrificing investment, growth and efficiency. Production growth last year in the oil sector fell to just over 2 per cent compared with an average of 8.5 per cent a year in 2000-2003. The earlier impressive increases were led by private sector companies, which served as benchmarks of growth and efficiency for the whole country. But, by raising oil export taxes, banning the construction of private oil pipelines and restoring control over some of the oil companies (Yuganskneftegaz and Sibneft), the growth era was brought to an end.