The Ministry of Natural Resources could hardly have chosen a more conspicuous time to issue its threat to foreign energy investment projects.

The ministry?s call to review production sharing agreements (PSAs) in Sakhalin, the shelf oil and gas projects in the far east of the country, coincided with the Russia-EU summit in Sochi and came less than two months before the G8 summit in St Petersburg, where energy security will be a key subject.

PSAs are legal contracts between companies and governments that underpin investments and are designed to safeguard foreign companies from political volatility.

Foreign investors say Russian politics is a Byzantine world and statements by one ministry against another should not be taken at face value. While the Ministry of Natural Resources called for a review of existing PSAs, the ministers for energy and economic development said Russia would abide by international contracts.

The threat by Yuri Trutnev, the minister for natural resources, to initiate legal proceedings against Total for allegedly violating the terms of its licence in one of the fields and set off a review of production-sharing agreements may remain just that ? a threat.

The same ministry has drafted legislation to limit participation of oil companies to the country?s mineral reserves deemed strategic. But the so-called sub-soil law is still to be published.

Yet the warlike language, including the threat of an investigation into Sakhalin projects, is part of a nationalistic approach to energy resources and anti-western rhetoric adopted by senior politicians in the run-up to the G8 summit.

The stage was set by Russia?s high-profile confrontation with Ukraine in January over gas prices and followed by its dispute with the European Union about access for Gazprom, the gas monopoly, to retail markets in Europe.

Yesterday the Ministry for Natural Resources argued for the creation of a national operator that would play a big part in Sakhalin-1 and Sakhalin-2 as a move to boost Kremlin control of key projects.

All this is taking place against the background of the state?s growing role in the energy sector and its apparent readiness to use it as a foreign policy tool.

Andrei Illarionov, a former economic adviser to Mr Putin and one of the most outspoken critics of the Kremlin, says Russia is suffering from three diseases that have helped shrink its oil production growth from double to low single digits in the past two years: ?the Venezuelan disease? of nationalisation, the Saudi disease of the 1970s of using energy as a weapon in international relations, and Zimbabwe?s affliction of ?next to total control of executive power over public and social life?.

For international oil companies, a reduction in their stake in Russian projects ? which for many constitute significant investments ? would be a serious loss at a time when they are finding it more difficult to locate new sources of oil. Most foreign companies in Russia are finding their reserves bases are already shrinking.

Royal Dutch Shell, which is leading Sakhalin-2?s $20bn project, says it had it in writing that the agreement would be honoured. Exxon Mobil said: ?While we will not comment on the recent news reports, we have a strong working relationship with the Russian government and the ministries responsible for Sakhalin-1.?

?Neither of these two projects ? Sakhalin-1 and Sakhalin-2 ? would have got off the ground without foreign participation and production-sharing agreements,? one industry insider says.

But the Ministry of Natural Resources, as well as some senior politicians, argue PSAs may be a wrong model for their country. ?Their argument is that PSAs may be fine for Africa, but not for Russia,? one foreign executive says.

Yet Russia?s action against Yukos and its threat to review the Sakhalin projects are the latest indication that PSAs are still the most suitable form of co-operation with foreign companies.

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