President-elect Vladimir Putin has made peace between Gazprom head Rem Vyakhirev and electricity monopoly UES chief Anatoly Chubais. That's bad news. It's not bad that they've stopped quarreling – though they're probably just pretending to have stopped. It's bad that it was the head of state who sorted out their mess.

Of course, relations between the Russian energy giants can't leave the state indifferent. Nor can the consequences that the quarrel could have had – shutting down power to thousands of businesses and millions of people. But it is not the state's job to make peace. The state should create conditions that would enable the squabbling parties to reach an agreement themselves.

The quarrel between the two energy oligarchs wasn't normal for a market economy. The buyer – ' UES – wants more gas from Vyakhirev's company, but Vyakhirev refuses to sell more. In a normal market economy, this doesn't happen, and if it's happening in Russia, it means Russia hasn't yet quite developed its market.

The conflict backs this up. First, as Vyakhirev explains, he sells gas to domestic consumers at a price that doesn't cover his expenses and makes up for his losses only through exports. This is probably true; otherwise, he wouldn't refuse to sell more gas on the domestic market.

Second, the consumers, and above all UES, don't pay for gas supplies on time, but Vyakhirev can't stop supplying them because the state keeps him under heavy pressure. If Gazprom stops supplying gas to the energy companies, they in turn would cut off power supplies to their debtor-consumers, thus setting off unrest among the population – something the state fears.

The result is a dead-end situation. Instead of being treated, the patient is simply stuffed with painkillers. The state should let Vyakhirev sell gas at market prices and let energy companies take measures to deal with their debtors. If this means that poorer people suffer, then the state should provide them with targeted assistance. This would be a normal role for the state, a role free of the socialist parasitic past.

If quick and sustainable growth continues, other potential obstacles could put a cap on growth: transportion, fuel supplies and the capacity of the machine-building and metallurgical industries. Ultimately, everything comes down to just two words – investment famine. Serious growth requires serious investment.

Growth in investment is the most important piece of news this year, though not yet fully appreciated by economic analysts. In January and February, investment in main capital stood at 106.3 percent compared with the same period last year. This is very modest growth by world standards, but in the Russian context, it is welcomed news, especially given that investment for the first two months of 1999 did not rise but fell to 86.3 percent of the 1998 level for the same period. Investment has picked up then by 20 percentage points, from 86.3 to 106.3, and has gone from negative to positive.

This is not the only good economic news to come out of recent days. For January and February, Russian exports increased one-and-a-half-fold over the same period last year, while imports rose only slightly. The result was a record positive trade balance of $9.5 billion for two months.

The good industrial growth of last year has so far been maintained and, despite forecasts to the contrary, has even picked up in pace. Industrial output for January and February reached 113 percent compared with the same period last year.

And finally, consumers are not paying for the increase in output with a decrease in income, as was the situation between 1997-1999. Real incomes have risen to 104.3 percent compared to last year. This is only slight growth and it doesn't compensate for the drop in incomes over past years, but it is growth nonetheless.

Economic analysts say these successes are not the state's doing – the state didn't do anything particular except not get in the way and not spoil the positive effect of favorable objective circumstances.

This is probably not quite so. Not all circumstances today work in Russia's favor. For a start, Russia hasn't received any external financing now for more than half a year. The losses this has caused the budget are comparable to what has been gained through high oil prices. But even without loans, Russia is paying its foreign debt – more than $2 billion in the first quarter, in excess of $3 billion in the second – and has even increased currency reserves by $3 billion over the last three months. Even more sensational, given the events of the last decade, is the fact that in March, Russia's inflation rate increased by less than that of the United States.

This can't be just pure coincidence. It could be that, finally, the years of effort by the reformers are paying off and the country's macroeconomic climate is improving. Market mechanisms are slowly beginning to work.

In answer to the debate on the role of the state – its main role is to end the pause in reform and see the transformations through to their end. Then the president would not have to personally make peace between the oligarchs.