FACTBOX-Key political risks to watch in Russia

MOSCOW, July 1 (Reuters) - The price of oil is the chief political risk factor for investors in Russia, followed by jostling ahead of a 2012 presidential election and the possibility of a major attack by Islamist insurgents.

These are some of the key issues.

OIL PRICE

Russia is the world's biggest energy producer and remains heavily reliant on oil and gas exports despite years of calls to diversify the economy. A fall in prices CLc1 would likely lead to a sell-off in the equity and bond markets and undermine Russia's recovery. Major investment banks expect the economy to grow by about 4 percent this year after shrinking by 7.9 percent in 2009, the worst performance in 15 years. 

Russia borrowed $5 billion this year in its first major sovereign issuance in a decade, and has said it may not need to borrow more for now.

But with an oil price of $75 per barrel figured into the budget, and deficits of over 5 percent this year and 4 percent next, Russia has left itself vulnerable to even a moderate drop in energy prices and may need to resort to borrowing again.

Serious economic troubles could undermine the popularity of Prime Minister Vladimir Putin, widely considered to remain in charge despite steering his protege Dmitry Medvedev into the presidency in 2008.

Putin presided over an economic boom fuelled by high energy prices during his 2000-2008 presidency, and as prime minister he is in charge of the economy.

What to watch: 

-- A sharp decline in oil prices would limit the Kremlin's ability to raise pensions and state wages and keep unprofitable Soviet-era enterprises running, laying the groundwork for potential public discontent.

-- A new appreciation of the rouble RUB=, which has fallen after hitting a 17-month high against a euro-dollar basket RUS=MCX in mid-May, could hurt Russia's recovery by making imports cheaper, undermining domestic manufacturers.

-- Borrowing. Russia says the $5.5 billion it borrowed in a Eurobond issue earlier this year should suffice, after oil prices stabilised at over $70 per barrel. But analysts say more borrowing could be needed in the future to plug deficits.

ELECTION

Despite being technically Russia's No. 2 leader, Putin is the dominant partner in a ruling tandem with Medvedev, the younger man he tapped as his favoured successor when a constitutional two-term limit kept him out of the 2008 presidential race.

Both men have suggested that one of them will run for president in 2012, and that they will agree in advance which one it will be. But despite their close ties, they appear to be jostling for popularity through orchestrated media appearances.

Some analysts dismiss this as part of a carefully choreographed Kremlin show, while others see increasing signals of a genuine struggle for authority, at the very least between the overlapping circles of Putin and Medvedev.

The stakes are higher than ever because future presidential terms will be six years instead of four, meaning that the next president could serve until 2024.

What to watch:

-- Clarity from Putin and Medvedev on their presidential election plans would cheer investors and could spark a rally in Russian assets, while signs of growing discord would cause jitters.

-- Most of the key posts in the Kremlin administration and the Cabinet are held by long-time Putin loyalists. A significant shake-up of high-level officials could mark a major shift in the balance of power and herald major policy changes.

-- Medvedev has indicated he favours cautious reforms to open up politics and bolster judicial independence, but has so far had little impact. Progress in improving the rule of law, property rights and democracy could spark optimism.

-- The second trial of imprisoned former YUKOS oil company chief Mikhail Khodorkovsky is seen as a bellwether of Russian policy. A not-guilty verdict or decision to drop the case could be a sign of liberalisation.

ATTACKS BY INSURGENTS

Twin suicide bombings in Moscow's subway system on March 29 killed 40 people -- the deadliest attack in the capital in six years -- and sparked fears that Islamist rebels from the north Caucasus could unleash a wave of attacks in Russia's heartland.

Islamist rebels who want to create a sharia-based state along Russia's southern flank claimed responsibility for the metro bombings in the Moscow metro, but there have been no major attacks since.

The self-proclaimed leader of the militants, a Chechen rebel named Doku Umarov who calls himself the "Emir of the Caucasus Emirate", has vowed to attack economic infrastructure such as the pipelines which feed Russia's $1.3 trillion economy.

What to watch:

-- Markets shrugged off the Moscow bombings and subsequent attacks within the North Caucasus, but further strikes on Russian cities or against economic infrastructure such as pipelines or power stations could spook investors.

-- Major attacks could also prompt the Kremlin to tighten societal controls, increase discontent with Putin and Medvedev and play into politics ahead of the 2011 parliamentary and 2012 presidential votes.

For political risks to watch in other countries, please click on [ID:nEMEARISK] (Reporting by Steve Gutterman, Guy Faulconbridge and Dmitry Zhdannikov, Editing by Sonya Hepinstall)