Russia's looking better than it has in years, setting up the country's equity market to turn in another sterling performance after 1999's 197% surge. A plethora of risks remain, and it's a fool's game to discount Russia's knack for blowing up spectacularly and taking out other markets with it. Still, the country may actually surprise on the upside in 2000 -- with a new president, a new parliament, economic growth and some semblance of stability on the horizon.

Less volatility on the political and macroeconomic fronts -- in the form of a coherent president and a prime minister who stays in office for longer than a football season, and at least some modest economic growth -- could help fuel returns in the equity markets. A few predictions:

Acting President Vladimir Putin will likely become Russia's president

when elections are held on March 26, ushering in an era in which Russians won't be treated to scenes of their president keeling over while standing still. Putin has risen to prominence largely thanks to the Russian war in Chechnya, a conflict that could still prove to be his political Waterloo if the Chechens show any hint of returning to the form they used in crushing the Russians back in 1994-96. But with former president

Boris Yeltsin

now unable to fire him, and with few realistic contenders to the presidency on the scene, Putin's chances look strong.

Putin may surprise on the economics front

, although his first policy decisions have been a mixed bag. One hope is that he will turn to some of the so-called "young reformers," such as Anatoly Chubais and Boris Nemtsov, to take over the economics portfolio. These two blew their chance at making a difference a few years back, and enjoy precious little credibility -- but the pickings in Russia are pretty slim on this front.

Corruption will probably remain a way of life in Russia

. Just because Putin's a former head of the successor agency to the

KGB

doesn't necessarily mean he subscribes to the religion of the rule of law. Anyone who finds his way to the

Kremlin

through "the Family," the shady insiders who largely controlled the Yeltsin regime, and via the massive Kremlin-operated media and propaganda machine, will have a difficult time turning on his backers -- even if he wanted to. Putin may surprise, particularly once he's elected, but it's far from foregone that he'll be a law-and-order kind of guy. Expect some modest housecleaning after March, but no wide-ranging anticorruption rampage.

The Russian political environment will cool down a bit

, with less of the noise that has characterized it over the past several years. The

Duma

, the vociferous lower house of parliament, newly elected on

Dec. 19, will probably get along better with the president than the previous house did, with positive implications for policy development and governance. Many optimistically expect that the new legislators will help bring about significant changes to Russia's creaking tax and banking system, improve the legal environment and reduce the red tape that paralyzes every aspect of doing business in Russia. But the president -- thanks to the near-monarchical powers he is granted by the Russian constitution -- still must take the lead.

On the macroeconomic front, Russia's minor ills won't infect other world markets

in the style of the August 1998 ruble devaluation, government debt default and resultant global liquidity squeeze and markets collapse. The ruble for the most part will remain stable,

GDP

will grow by 2% or so and inflation should remain moderate at about 25%. Unfortunately, though, growth will continue to be limited mainly to Moscow and St. Petersburg, to the detriment of the vast expanses of the rest of the country, where poverty is despairingly mundane. Despite massive capital flight and the

International Monetary Fund's

unwillingness to lend money to Russia as long as the war in Chechnya drags on, Russia won't need to default on any class of debt it hasn't already missed payments on.

Look for Russia's stock market to turn in a strong year

on the back of greater stability and less risk (in a relative sense). But playing the Russian equity market is sometimes like hopping through a minefield, blindfolded, on a pogo stick. In the sentiment-driven and momentum-driven Russian market, it doesn't take much to see major ups and downs over the course of weeks, as suggested by the 58% surge in the

Russian Trading System Index

since the parliamentary elections in December.

One way to play this market is through a fund that focuses on Russia, like the closed-end

(TRF)

Templeton Russia Fund or the open-end

(LETRX) - Get Report

Lexington Troika Dialog Fund. Otherwise, stocks among those likely to benefit from increased funds flow to Russian securities are oil producers

Tatneft

( TNT), long-distance carrier

Rostelecom

( ROS) and cellular provider

VimpelCom

(VIP)

, although the last two appear fully valued at this point. Less liquid but attractively valued are a few of Russia's strongest oil companies,

Surgutneftegaz

( SGUZY),

LUKoil

(LUKOY)

and

Sibneft

( SBKYY).

Of course, nothing is for sure in Russia, and any number of conceivable developments could upend the fairly sunny outlook for 2000. The price of oil -- which played a key role in helping Russia emerge from the depths of financial disaster last year -- could well dip, pressuring oil company earnings and the Russian economy, as well as market sentiment.

Also, Russian politics make a sport of defying expectations, and there may yet be some surprises down the road -- like a dramatic weakening in public support for Putin or the rise of a viable presidential alternative, or grumblings from "the Family" still ensconced in the Kremlin. The Chechnya war could go terribly wrong, and a renewed spate of apartment building bombings like those last September could cause leery investors to flee

en masse

. Or, another Russian company could stamp on minority shareholder rights, damaging sentiment and pressuring the market.

But investing -- least of all in Russia -- is never easy.

Kim Iskyan is an equity strategist at Moscow-based brokerage firm and investment bank Renaissance Capital. The firm's analysts rate the shares of Tatneft, Sibneft and LUKoil buys, and have done no previous underwriting for the companies; those of Surgutneftegas long-term buy, no underwriting; and market performer on Rostelecom, no underwriting. Iskyan began his career at the emerging markets trading desk of Oppenheimer & Co. At the time of publication, he held no positions in any of the companies mentioned in this column, though positions can change at any time. While he cannot provide investment advice or recommendations, he invites you to comment on his column at kiskyan@rencap.com.