By Dmitry Zhdannikov and Robin Paxton
MOSCOW (Reuters) - Russia's huge resources and a consumer products boom promise robust growth for another decade, but recent events including war in Georgia underscore the political risks to its financial markets.
Top executives and policy makers will examine the country's path in a series of exclusive interviews at the second Reuters Russia Investment Summit to be held September 8-10.
The Kremlin aims to lift Russia's $1.3 trillion economy into the world's top five by 2020. Now among the 10 largest, it is set to double its 2003 size by 2010, two years earlier than anticipated.
Retail and infrastructure are emerging as rising stars as the country attempts to cut dependence on commodity exports.
Its $600 billion in gold and foreign exchange reserves, the world's third biggest, have helped Russia remain resilient to the global credit crunch.
RECENT TURBULENCE
But Russia has taken a hit since its stock market reached its high after new President Dmitry Medvedev took over in May from his political mentor Vladimir Putin, who became prime minister.
Putin's July attack on coal miner Mechel (MTL.N: Quote, Profile, Research, Stock Buzz) revived memories of oil firm YUKOS's demise and the war in Georgia caused the biggest fall since the aftermath of Russia's 1998 financial meltdown as investors dumped Russian assets.
The Kremlin is battling inflation, now running at nearly 15 percent on an annualized basis, and investment in the country has suffered in the wake of a conflict between oil giant BP (BP.L: Quote, Profile, Research, Stock Buzz) and its Russia-connected partners over management and strategy at their venture TNK-BP.
Russia is the worst performer among emerging markets this quarter, with the benchmark RTS index .IRTS down 36 percent since May. Merrill Lynch tells investors to favor China.
"Russia's risk perception has definitely changed, at least temporarily, but the fundamentals remain because the economy is growing and there are investment opportunities," says Sergei Glaser from investment fund Vostok Nafta, where he helps manage $3.3 billion worth of stock in gas giant Gazprom (GAZP.MM: Quote, Profile, Research, Stock Buzz) and a $1 billion fund with assets from agriculture to infrastructure.
NEW EQUILIBRIUM
Still, few investors are ready to class Russia a "pariah" and the majority predict a recovery as long as tensions with the West calm down.
The biggest questions are how and when.
"I don't see Russia going down the route of Venezuela," said Zina Psiola, head of emerging markets equities at Swiss bank Clariden Leu and manager of the bank's $750 million Russia fund. Continued...
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