A SPECTRE is haunting Russia: the spectre of shale gas. It is seeping into the salons of power, discomfiting Russia’s leaders and their bizniz cronies. Energy companies account for half of the value of the Russian stockmarket, and a single, state-backed firm, Gazprom, produces 10% of the country’s exports. Russian politics are also built on conventional oil and gas: Vladimir Putin is in essence the CEO of Russian Energy Inc. The revolution in unconventional gas production from shale beds, which began in the United States and is now spreading around the world, is shaking Russian state capitalism to its foundations.

All the powers of Mr Putin’s Russia have joined in a holy alliance to exorcise this spectre: president and prime minister, oligarchs and bureaucrats, trendy environmentalists and Kremlin police-spies. Mr Putin has denounced shale for costing too much and ruining the environment. Alexey Miller, the boss of Gazprom, has described the revolution as a “myth” and a “bubble that will burst soon”. “We are sceptical about shale gas,” he says. “We don’t see any risks [to us] at all.” But more recently the ruling clan’s position has become more nuanced. Mr Putin now admits that there might be a “real shale revolution” after all. He has declared that he is monitoring the revolution carefully, and urged Russia’s energy companies to “rise to the challenge” of shale.

The same ambivalence could be found at the annual St Petersburg International Economic Forum, held on June 20th-22nd. The forum projected its usual image of Russia as a country that has come in from the cold and joined the global business community. Almost 3,700 businesspeople and officials gathered to discuss the sort of things that such people discuss whenever they get together: reducing corruption, reigniting growth, freeing trade.

The forum had not a single public session on shale. But like Banquo’s ghost, it haunted the banqueting rooms. It kept arising in conversations in the Pepsi-Cola café and the Mercedes-Benz Star Bar, with phrases like “game changer” and “disruptive innovation” thrown about. It was the subject of a closed-doors session chaired by Daniel Yergin, an American energy consultant, and including the bosses of a dozen of the world’s biggest energy companies. Alexander Novak, the energy minister, told the panel there would be tax reforms to promote unconventional oil and gas. But Mr Putin, reverting to anti-shale mode, said at the forum that it was uncompetitive, causes “blackness” in drinking water and sets off lots of “explosions”.

The shale revolution is changing the balance of power between the Russian bear and its European customers. In the past Russia was so confident of its producer power that it felt able to bully clients: it cut off gas supplies to Ukraine in both 2006 and 2009 during contract negotiations. But America’s shale-driven transformation from a declining energy power to the world’s biggest gas producer, and a potential big exporter, is pushing down the price of gas on the world market. Supplies of Middle Eastern liquefied gas that America no longer wants are now being offered to Europeans. This week a consortium was chosen to pipe gas from Azerbaijan to western Europe, further reducing dependence on Russian supplies. Europeans are finding they have bargaining power: Bulgaria recently negotiated a 20% price cut in its new ten-year contract with Russia. Others are also determined to free themselves from their dependence on a country that has used energy as a weapon of foreign policy. Poland and Ukraine are intent on developing their own supplies of shale for strategic as well as economic reasons.

Gazprom is a wounded giant these days, and shale is one of the things that has hurt it most. In 2008 it had a market capitalisation of $367 billion, and Mr Miller speculated that it would become the world’s first trillion-dollar company. Now it is worth just $78 billion and its business model—pumping money into the Kremlin in return for protection against competition—looks bust.

Putting Gazprom on the spot

More agile companies, such as Norway’s Statoil, have adapted to the gas glut by offering customers “spot” prices instead of ones indexed to the oil price. The European Commission is contemplating forcing Gazprom to sell its pipelines, and to pay antitrust fines of up to $14 billion. And domestic competitors such as Novatek are asking why a company that “slept through” should still enjoy a monopoly on gas exports.

Novatek’s share price has risen by 60% since 2008, whereas Gazprom’s has fallen by three-quarters. It has huge ambitions, including a partnership with Total of France to build a gas-liquefaction plant in north-western Siberia to ship gas to Asia and Europe. Novatek is a new kind of company, built from scratch rather than from Soviet leftovers, but it is no virgin. Gennady Timchenko, one of Mr Putin’s allies, increased his shareholding to 23% in 2009. It also enjoys the support of other energy giants such as Rosneft, Russia’s biggest oil producer, which plans to double its share of the domestic gas market by 2020, in part by tapping shale. But getting rid of Gazprom’s monopoly of gas exports would nevertheless mark a step in the right direction.

Some analysts point out that Russia is well able to survive the energy upheaval. It has its own potentially huge reserves of shale gas and oil, as Mr Putin likes to brag when he flips into a pro-shale mood. It can look east as well as west, to energy-hungry markets such as China. Perhaps, like so many fictional ghosts, the spectre of shale has come to deliver a timely warning: that if you invest your profits in fattening monopolies rather than promoting innovation you are likely to be humiliated. Messrs Putin and company need to abandon their futile attempt to exorcise the spirit of shale and listen instead to what it is trying to tell them: what is good for Gazprom is not necessarily good for Russia.