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Towards an energy strategy

The Russian government's long-term energy strategy to 2020 was sent to the Cabinet for discussion last month and should be approved before the summer holidays. The development of the energy sector remains a priority for the Kremlin, accounting for half the economy and just over three-quarters of stock market capitalization.

"Russia will always be primarily a raw materials exporter. It is where Russia's competitive advantage lies and despite the efforts to diversify the economy the Kremlin will never lose sight of the importance of these resources to Russia's future development," says Rory MacFarquar, an economist with Goldman Sachs.

President Vladimir Putin's administration has developed a habit of consistently under-estimating Russia's progress. The draft is short on detail and modest in its predictions but lays out a plan for steady improvement and a more efficient, market-oriented Russia.

The strategy offers a pessimistic and an optimistic long-term projection for oil and gas output and the investment required. Having languished at about 6 million barrels per day (bpd) for most of the past decade, oil output growth is expected to reach 8.9 million to 9.8 million bpd by 2010 and 9 million to 10.4 million bpd by 2020. This compares with the 8.1

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