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When this book went to the publisher a few months ago, it had disturbing implications for Europeans dependent on gas for heating and Americans dependent on gas for running a car. The author, a Harvard-based economist, uses his formidable knowledge to show how Vladimir Putin has been making Europeans increasingly dependent on energy supplies that the Russian state controls.

However, by the time the book reached this reviewer, its message was disturbing for Putin, too. The economy he controls is overdependent on exporter energy. Oil prices have more than halved in less than a year, and Russia's budget faces a rapidly widening hole.

A strength of the book is that it starts with oil politics in the time of the tsars and the Rockefellers. In 1900, thanks to discoveries around Baku, Russia was a bigger producer of oil than the United States, and a major exporter too. The Communist revolution put a stop to that.

By 1929, Russia had returned to the production levels of 1900, while American oil production had increased by ten times. The gap did not begin to close until the early 1960s. Since the late 1980s, Russia has usually been pumping more barrels of oil per day than the US and at a level comparable to Saudi Arabia.

Moscow's control of the economy has made oil both a blessing and curse. When prices are high, its export has provided the hard currency needed to import foodstuffs that cannot be produced domestically because of the pathologies of Russian agricultural policy.

Inefficient and slovenly management of oil extraction has led to the loss of great sums of revenue in good times and bad. It has also led to the burning-off of gas, a byproduct of oil, rather than its capture and sale for further profits, thus contributing to environmental degradation. However, when oil prices are low, as in Gorbachev's time, it greatly weakens the Government.

By coincidence, Putin took office when world energy demand and oil prices were rising. Goldman charts the steps that Putin has taken to rebuild Russia's place in the world through a form of power politics that rests on energy rather than guns. Putin has used the state's monopoly of interpreting and enforcing laws to take natural resource companies from Russians who had become billionaires in the 1990s by acquiring these assets. Moreover, he has bought out for a relative pittance the shares of foreign companies, including BP and Shell, that had invested billions of dollars in developing new oil and gas fields.

Goldman notes that this should not have surprised Western investors, given Russia's longstanding tradition of exploiting foreigners as well as oil. In addition, Putin has been seeking to control energy pipelines from Central Asia to Europe, and the occupation of North Georgia is a small part of that strategy.

The quasi-reassuring news Goldman offers is that Russia cannot control the world supply of oil or its price: it is an internationally produced and traded commodity. The consequences of this are now felt on the Moscow stock market as well as by Western commodity speculators. However, Russia has also become the major supplier of gas and controller of gas pipelines to continental Europe. Unlike oil, gas is not easily shipped between continents, and the lead time and cost of developing alternative sources of gas are very substantial.

The historical narrative adds depth and authority to an analysis that is much more disturbing for its avoidance of shock-horror cliches. The audience that ought to be most disturbed is in Germany. However, Britons can hardly be smug, for both London and Edinburgh know that North Sea oil and gas cannot last forever, and a great bank of wind farms around Westminster cannot meet Britain's long-term energy needs. France has achieved a high degree of energy self-sufficiency by a solution that produces other anxieties: it generates more than three quarters of its electricity from nuclear power.