In the Wake of Sakhalin II: How Non-Governmental Administration of Natural Resources Could Strengthn Russia\u27s Enery Sector

Russia’s economically vital oil and gas industry is at a crossroads. Although foreign investment favored European nations in the wake of the Soviet collapse, in recent years American and European oil and gas companies have invested billions of dollars in Russia’s energy development and export distribution sectors. However, the 2006 restructuring of the $20 billion Sakhalin II project demonstrates that Russia’s energy sector has still not stabilized from the turbulent privatization of the 1990s. This comment explores the legal structures and Government policies affecting Russia’s oil and gas industry for evidence of the causes of institutional instability. It argues that to prevent political and business elites from continuing to manipulate the country’s most profitable industry, Russia’s energy resources should be administered by an independent entity, a Public Leasing Authority. By creating a new institution with transparent motives, Russia may be able to remove the historic temptation to use economic regulation to accomplish short-term political goals and thereby enhance the stability of its energy sector and its larger economy