ETFs for Exposure to Emerging Russia

The transition from the centrally planned economy of the Soviet era to the market economy found in Russia today couldn't have been an easy one. Nevertheless, Russia's market infrastructure is now robust and ready for growth.

Since the country's economic meltdown almost a decade ago, the Russian economy has seen awesome growth -- averaging more than 6% per year (see GDP data from the Central Intelligence Agency and other economic data from the Bank of Russia). And this economic resurgence is expected to continue: In a statement made earlier this year, Russia's finance minister Alexei Kudrin predicted that investment in Russia will increase 26% this year. (See the article from Russia's RIA Novosti.)

Why is Russia experiencing a high level of investment activity? Russia is a commodities giant. With massive reserves of oil, coal, natural gas and minerals, the world's demand is certainly helping the country's prospects increase. Russia's vast holdings of these precious natural resources are making it a key player for anyone who's hoping to make some money on rising energy prices (see "Eni, Gazprom to Link Russia, Europe With Pipeline").

However, to stay competitive long term, in addition to energy, Russia will need to see growth in other sectors (like technology and financial) in the coming years.

R Can Also Stand for Risk

Russia is seen as the riskiest of the BRIC countries. As TheStreet.com's Lawrence Carrel wrote in May, "Corruption and a lack of corporate transparency contribute to the market's inherent volatility." (See Questionable Timing for First Russian ETF".)

With some investors already burned -- or at least scared off -- by Russia's past and present volatile climate, many are reluctant to put money back in the country. Even so, the growth of Russia's economy is proving tempting for those who were once wary of the country.