Vladimir Putin has grand designs for the Russian oil and gas industry. In the post-Cold War era, the design should be based on the huge hydrocarbon reserves that could return Russia to its past glory. Russia's energy sector could be a source of power and prestige, to replace its once great military, now a shadow of its former self.
Like many Russians, President Putin does not trust private businesses, domestic or international, to be good stewards of Russia's energy patrimony or to serve national interests. He believes the state must play the dominant role in certain strategic industries, particularly oil and gas. After all, oil and gas revenues and taxes are as much as 50 percent of government revenues, generate most of the country's foreign exchange and subsidize domestic industry and agriculture. Many Russian industries are extremely inefficient Soviet-era relics; cheap energy, primarily natural gas at below world-market prices, is essential to subsidize their operations.
Gazprom: National Energy Champion?
Putin's original plan--to merge Gazprom, the giant gas monopoly, with Rosneft, the state oil company--did not come to pass, but he remains intent on establishing the state's dominance in Russia's oil and gas sector. The problem is that the Kremlin runs the risk of unnecessarily damaging its petroleum sector, instead of building national champions.