This week, several banks are poised to lend billions of dollars to the Russian government to purchase Gazprom, a large privately held natural gas company. Some see the transaction as progress, because two years ago the same Russian government used its vast administrative powers simply to expropriate the oil company Yukos.

But government ownership of Gazprom, or any other firm that competes with private companies, is a mistake. Whether through expropriation or legitimate purchases, government ownership of enterprises that compete with private businesses leads to inherent conflicts.

The motives of government-owned corporations are difficult to discern. Last month, the largely government owned China National Offshore Oil Corporation attempted to purchase the American oil company Unocal. Congress objected both to the government ownership and the nationality of Cnooc. The profit motives of Cnooc would potentially be trumped by the other interests of the government of China.

Our government has long looked warily at foreign government ownership, control, and influence on investments in America. During World War I, the federal government prohibited foreign ownership in the nascent American radio industry from fear of German influence. Although restrictions of foreign ownership in the communications sector have gradually relaxed over the decades, a foreign corporation still faces more hurdles than a domestic firm to acquire assets in America.

Historically, government-owned enterprises, such as postal services, have been granted government monopolies to prevent competition. Today, practically every government in the world, including ours, has substantial ownership, control, and influence over many enterprises. While some of these businesses are monopolies, others are in direct competition with private companies. In most countries, it is the norm rather than the exception to have governments own or control enterprises that are in direct competition with private companies in the energy, transportation, and health care sectors, as well as many others.

Enterprises owned and influenced by the government have motivations other than the profits pursued by their purely private counterparts. These other motivations necessarily harm the efficiency of the business enterprise. Government ownership of Yukos and Cnooc leaves these companies less efficient than an Exxon-Mobil or other private firms against which Yukos and Cnooc compete.

To survive in a competitive market, such government enterprises are propped up through subsidies and regulatory interventions that harm competitors, taxpayers, or both. We look suspiciously at government-affiliated enterprises not because they are naturally competitive but precisely because they are not.

Ironically, we cast skeptical eyes on the motivations of businesses owned, controlled, or influenced by foreign governments while we turn a blind eye to those owned or influenced by our own government.

Consider the electricity sector. In the 1930s, our federal government created many enterprises, some of which, such as the Bonneville Power Administration and Tennessee Valley Authority, still survive. Many municipalities formed electricity companies as well.

For decades, these businesses were immune from competition. In our national electricity grid today, government-owned utilities sometimes compete with privately owned companies. Federal regulators are in the awkward position of making decisions that affect entities to which the federal government has fiduciary responsibilities.

Government enterprises are not merely vestiges of the past. In recent weeks, Philadelphia, San Francisco, and other municipalities have moved forward on plans to offer government owned wireless services. The same municipalities that are creating their own wireless companies are also regulating the rights of ways, building permits, and other local government requirements of competing telecommunications companies. This is a clear conflict.

Conflicts of interest may also develop from government investments in private firms. Many state pension funds own substantial interests in many publicly traded businesses. The same state governments that manage these funds also regulate the businesses in which they invest. Some states even seek to designate directors for corporations in which state pension funds invest. State governments are left regulating the same firms in which the government has a financial interest.

Many governments around the world believe government ownership, control, and influence of firms enhance their economic success. They are wrong. Combining government authority with business decisions is a mistake. We can do better by clearly separating the creation and enforcement of laws from day-to-day private business decisions made to satisfy customers.

A former FCC commissioner, Mr. Furchtgott-Roth is president of Furchtgott-Roth Economic Enterprises. He can be reached at hfr@furchtgott-roth.com.