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Though the Group of Eight nations probably won't mention it in the official communique from its St Petersburg summit, the organisation faces an embarrassing 'Russia problem' that is only likely to grow worse.

'The leaders of western democracies have every reason to downplay this paradox, that they have an undemocratic Russia sitting at the head table and dictating the G8's agenda,' says Lilia Shevtsova,  a leading analyst and senior associate at the Carnegie Centre in Moscow.

'They will certainly paper over their differences and make nice faces for the cameras, but this is a problem that is not going away.'

Ahead of yesterday's official opening of the summit an exchange between US President George W. Bush and his Russian counterpart Vladimir Putin highlighted steadily worsening ties between the two countries over the issue.

Mr Bush had declared that it was wrong to 'expect Russia to look like the United States', but pressed Mr Putin on issues like the role of an independent media and suggested that war-torn Iraq might be a model to follow.

Mr Putin jokingly replied: 'We certainly would not want to have the same kind of democracy as they have in Iraq, I will tell you quite honestly.'

But the spruced-up and politically cleansed St Petersburg that greeted G8 leaders arriving for the summit offered an illuminating case study in how Mr Putin's Russia increasingly functions. In the weeks leading up to the summit, hundreds of vagrants were scooped from the streets and herded onto trains headed for distant cities, more than 1,000 small roadside tobacco and beer kiosks were summarily demolished with no compensation to owners, and people living in homes facing main roads got official letters ordering them to wash their windows and cease hanging laundry on their balconies.

Local political dissenters were visited by police and sternly warned to leave town. Scores of left-wing activists headed for an anti-G8 'Social Forum' in St Petersburg were pulled off trains and had their documents seized. Some reported being beaten. Others were tossed into prison, without explanation, for several days.

'The security forces conducted 'Operation Shield', which basically sealed off St Petersburg from the rest of the country in order to control it like a theatre stage for the duration of the summit,' says Boris Kagarlitsky,  an organiser of the Social Forum. 'It's exactly the sort of thing the Soviet secret police used to do when foreigners came visiting.'

Russia was admitted to the G8 in 1997 amid euphoric post-Soviet hopes that membership would help it evolve more rapidly into a western-style, market-driven democracy. But since Mr Putin came to power in 1999, first as prime minister and then a two-term president, the country's development has moved in directions that many observers find ambiguous, and some say is deeply troubling.

Russia has seen seven years of robust economic growth, partly driven by the ever-rising price of the country's main export, oil. The state no longer attempts to control people's private lives - as the former communist regime did - and modest prosperity has enabled millions of people to travel abroad, build their own homes and launch western-style careers.

But at the same time the Kremlin, often acting through state-run firms, has seized control of the country's TV networks, shut independent newspapers and slashed the scope for media debate. Changes to electoral laws have rolled back democracy and stacked the deck in favour of the pro-Kremlin colossus, the United Russia party. Many non-governmental groups say they fear recent legislation regulating NGOs and a new law that defines some kinds of criticism of authorities as 'extremism' will be used to quash any activities that don't toe the Kremlin line.

'There is a systematic crisis of democracy in Russia today,' says Yury Dzhibladze,  director of the independent Centre for the Development of Democracy and Human Rights in Moscow. 'For us, it's a bitter irony that Russia became chairman of the G8 just as our authorities were breaking decisively with the standards that organisation represents.'

Some observers say that many achievements of Mr Putin's Russia may be real enough, but they do not run very deep, nor do they reveal much about the country's often ugly social realities.

'There are two very different Russias, and they are moving apart quickly,' says Dmitri Suslov,  an expert with the independent Council on Foreign Relations and Defence Policy in Moscow. 'The Russia that Putin displays to his G8 colleagues is an 'energy superpower', a country that is reviving economically, with a state that is growing ever stronger.

'But there is another Russia, which is not modernising, a Russia of pervasive corruption, ineffective services and arbitrary police action, where the state is unable to fulfil its most basic obligations. Never since the collapse of the USSR has the gap between these two Russias been so wide.

'Our authorities are attempting to conceal this gap by reviving Soviet propaganda methods and the Soviet style of governance.'

A British think-tank, the Foreign Policy Centre, recently published a 'Summit Scorecard' that gives Russia failing marks in every key standard associated with G8 membership.

The report  concludes that Russia's GDP is far below the G8 average; it is not a democracy; it lacks a functioning market economy; it has an increasingly closed society and its government often takes foreign policy stances that are at odds with western interests.

In pre-summit interviews with western journalists last week, Mr Putin lashed out at the critics.

'The constant criticism of problems related to democracy, press freedom, etcetera are used as an instrument to interfere with Russia's internal and foreign policies, and influence them,' he said.

'I'm concerned that this approach is based in the philosophy of the 20th century, when our partners always intended to harm Russia, seeing it as a political opponent or even an enemy. It's a remnant of cold war thinking'.

The challenge facing the G8 is how to continue co-operation with Moscow in practical areas such as energy security, civilian atomic technology, anti-terrorism and combating nuclear proliferation, while accepting that Russia is unlikely to ever conform with the organisation's core values, experts say. 'Russia is stuck between traditionalism and modernity, and struggling to find its place in the world,' says Ms Shevtsova. 'The west needs to deal with Russia, at least until it finds some way to diversify its energy supplies, so it's in everyone's interests to strike a deal on pragmatic issues.'



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