According to the World Bank, the post-crisis environment in Russia provided the necessary catalyst for reforms when it comes to the country’s structural constraints and weak domestic demand, writes Gleb Bryanski for Reuters. Without reforms, the World Bank believes Russia’s growth will remain sluggish. (Ways to play Russia’s recovery).

Russia’s Central Bank is expected to continue to cut interest rates to ease lending, but the cost of lending still remains high. The Russian Central Bank is trying to dampen the appreciation of the ruble and will soon have to choose “between maintaining a competitive exchange rate for tradable industries and avoiding inflationary pressures,” says the World Bank.

A return of capital inflows to Russia is expected by the first quarter of 2010 as oil prices increase and the global outlook improves. Russia’s inflation rate will range between 9% and 10% in 2010, but stimulus policies may raise it further in the second quarter. The unemployment rates may also rise based on seasonal factors. (Russia’s potential stumbling block).

Prime Minister Vladimir Putin stated said the government will continue to enact measures aimed at boosting domestic demand, strengthening the banking system and decreasing the budget deficit, as stated in BusinessWeek.

According to the Economic Development Ministry, Russia’s GDP is projected to contract 8.5% for 2009. The economy grew 0.6% in the third quarter, signaling an end to their recession.

For more information on Russia, visit our Russia category.

• Market Vectors Russia ETF (NYSEArca: RSX): up 137.2% year-to-date

• iShares Emerging Markets Eastern Europe Index Fund (NYSEArca: ESR): up 5% in the last month; Russia is 75%

• SPDR S&P Emerging Europe (NYSEArca: GUR): up 81% year-to-date ; Russia is 65%

• Dow Jones Emerging Markets Energy Titans (NYSE: EEO): up 16.8% in the last three months; Russia is 36.3%

Max Chen contributed to this article.

Van Eck

Van Eck now manages about $9.7 billion in assets. Their varied lineup includes about 20 funds that range from gambling companies to alternative energy to the Persian Gulf, reports Ian Salisbury for The Wall Street Journal.

Their strategy involves “nibbling at the edges”  which enables them to offer products that dabble in niche markets that generally aren’t available elsewhere. While both Van Eck and the fund industry giants with which it competes offer narrowly focused funds, the giants tend to offer slates of ETFs that, taken together, cover the entire market. (ETF portfolio basics).

Van Eck’s offerings don’t cover the spectrum, though. They have funds that cover steel, Russia and the gold mining industry, but you won’t find funds aimed at Japan or Western Europe. What most of their ETFs do have, as the company says, is some kind of relationship to “hard assets.” (The benefits of hard assets).

For more stories about ETFs, visit our ETF 101 category.

• Market Vectors Russia (NYSEArca: RSX): up 116.6% year-to-date

• Market Vectors Gold Miners (NYSEArca: GDX): up 36.3% year-to-date

• Market Vectors Agribusiness (NYSEArca: MOO): up 38.9% year-to-date

Russia’s GDP is expected contract 7.5% this year, and the government is forecasting 2% growth in 2010 while many independent economists are estimating growth of as much as 5% next year, reports Jason Bush for Forbes. (Stumbling blocks for Russia’s growth).

Russia’s economy grew 0.6% in the third quarter from the previous three months, but GDP was 9.4% lower than last year’s levels, writes Nataliya Vasilyeva for BusinessWeek. The Economic Development Ministry stated that the improvements were attributed to less capital outflow and to companies replenishing stocks.

Manufacturing and agriculture have been the main industry drivers, with agricultural activity increasing by 10% and industrial production increasing by 5.1%. Retail sales diminished 9.9% on the year in September. (Four things going for Russia).

The downturn hit Russia hard for three primary  reasons, Bush at Forbes says. These are reasons to use caution when investing in Russia and to have an exit strategy in place. (How to follow trends).:

• One reason is oil prices – they plummeted, and Russia plummeted along with it. They recovered somewhat, and so did Russia.

• Another reason is their companies’ idiosyncrasies, which include holding copious stocks of inventory and engaging in cost-plus accounting, which means companies initially resist price cuts by reducing wages. These two reasons helped explain why Russia’s output plummeted early in the downturn. (Ways to play oil and Russia).

• Furthermore, Russia’s financial sector is still struggling and bad loans are expected to reach 20% by the end of the year.

For more information on Russia, visit our Russia category.

• Market Vectors Russia ETF (NYSEArca: RSX): up 119.9% year-to-date

• iShares Emerging Markets Eastern Europe Index Fund (NYSEArca: ESR): down 8.4% in the last week, recently launched; Russia is 75%

• SPDR S&P Emerging Europe (NYSEArca: GUR): up 68.5% year-to-date ; Russia is 65%

• Dow Jones Emerging Markets Energy Titans (NYSE: EEO): up 5.9% in the last three months; Russia is 36.3%

Max Chen contributed to this article.

Turkey. Turkey is rapidly developing and there’s no indication that the economy needs aid from the International Monetary Fund (IMF). Growth in the economy could likely accelerate in 2011 after a return to growth in 2010. Turkey’s market index has been driven up by the banking sector, which makes up around 40% of the market. Bank earnings have been bolstered by a series of rate cuts that have reduced interest on customers’ deposits as lending rates remain high. (Does Turkey need more support?)

• iShares MSCI Turkey Invest Mkt Index (NYSEArca: TUR): up 179% since low; up 101.6% year-to-date

Russia. Next year’s growth could top 2% if oil prices stay high. Greater revenues from taxes on energy companies could also ensure this year’s budget deficit is smaller than expected. Economists believe Russia’s GDP growth may gain a foothold as soon as the fourth quarter because of fiscal stimulus. Additionally, the economy will pick up speed once oil prices increase and world economies recover. The Russian economy is dominated by resources and banking. (Russia’s potential stumbling blocks).

• Market Vectors Russia (NYSEArca: RSX): up 161% since low; up 139.5% year-to-date

Brazil. Brazil could sustain average annual economic growth of 5% over the next 10 years. Low inflation and sound fiscal policy have released a tide of investment in Brazil. For now, Brazil’s small-caps are benefiting from the carry trade. Companies are hiring workers to meet growing demand for manufactured goods and new homes. In 2010, Brazil’s economy is expected to grow 4.4%; this year, growth is expected to be around 0.12%. (Seven things to like about Brazil).

• iShares MSCI Brazil Index (NYSEArca: EWZ): up 125% since low; up 114% year-to-date

India. The Indian Prime Minister’s Economic Advisory Council expects the GDP to expand 6.5% to 6.75% in 2009-10, despite a potential decline in agricultural output. Inflationary concerns may be met by tighter monetary and fiscal policies in the coming months. Factors such as capital flows, domestic demand, portfolio flows and a strong savings rate have India in a good position to continue moving forward. (Why India could strengthen).

• WisdomTree India Earnings (NYSEArca: EPI): up 138% since low; up 88.2% year-to-date

Indonesia. A young population and a falling birth rate equate to a surge in the ratio of working population to the number of dependents. Circumspect fiscal policy has left the government with enough cash for infrastructure and public services. Indonesia may enjoy a period of political stability and does not rely too heavily on exports. Declining interest rates have helped boost consumption, which is around 60% of GDP. (Five points in Indonesia’s favor).

• Market Vectors Indonesia ETF (NYSEArca: IDX): up 180% since the low; up 155.6% since Jan. 20 inception

Max Chen contributed to this article.

Growth prospects for the next year are looking ripe for Russia, but the country must overcome the rouble’s highs against the euro. Darya Korsunskaya and Yelena Fabrichnaya for Reuters report that the appreciation of the rouble does allow for lower inflation and more trust in the banking system, despite the dangerous levels. (How to play Russia and China’s gas deal).

On the plus side, next year’s growth could top 2% if oil prices stay high. Greater revenues from taxes on energy companies could also ensure this year’s budget deficit is smaller than expected, according to the Finance Minister. Itar Tass forBusiness Standard reports that serious work is needed at the business and state level. Even if negative aspects of oil’s growth take over, Russia’s economy still stands in a good position, analysts note. (Four things going for Russia).

For more stories about Russia, visit our Russia category.

• Market Vectors Russia (NYSEArca: RSX): up 144.1% year-to-date

• CurrencyShares Russian Rouble (NYSEArca: XRU): up 6.2% year-to-date

Read the disclaimer, as Tom Lydon is a board member of Rydex Funds.

The deal calls for a supply of nearly 2.5 trillion cubic feet of gas per year via two potential routes originating from Siberia. The deal focuses on Central Asian countries and Russia as suppliers of natural gas, reports Edward Wong for The Wall Street Journal.

Gazprom, Russia’s state-run gas supplier and China National Petroleum Corp., China’s largest oil and gas supplier, have not yet worked out pricing details. (Read about the four things going for Russia).

A pipeline will run along the bottom of the Baltic Sea, driving a political wedge between Eastern and Western Europe. Central and Eastern European leaders fear the pipeline could usher in another round of domination by Russia through the use of gas, reports Andrew E. Kramer for The Wall Street Journal.

Russian gas has already been routed through Eastern Europe to Western Europe services. The new pipeline will give Russia a direct supply line to the west, enabling it to play “pipeline politics” with its eastern neighbors.

Read on for more stories about Russia, China or natural gas.

• Market Vectors Russia (NYSEArca: RSX): up 137.7% year-to-date; Gazprom 7.1%; RSX is also 43% energy

• iShares MSCI BRIC (NYSEArca: BKF): up 83.8%year-to-date; Gazprom is 4.1%

• First Trust ISE Revere Natural Gas (NYSEArca: FCG): up 52% year-to-date

• PowerShares Golden Dragon Halter USX China (NYSEArca: PGJ): up 63.2% year-to-date; China National Petroleum is 4.7%

Assets: $961 million

Objective: RSX seeks to track the performance of the DAXglobal Russia Index.

Holdings: The fund’s top holdings include gas company Gazprom, 7%; Lukoil Company, the largest oil company in Russia, 6.4%; and Sberbank Rossi, the largest bank in Russia, 7.7%.

What You Should Know

• RSX is up 134.6% year-to-date, making it the best-performing unleveraged ETF so far.
• RSX is most heavily weighted in energy companies, and these holdings make up 43% of the fund.
• The iron and steel sector is 16.5% of the fund and telecommunications is 13.3%.
• The fund is mostly made up of large-caps, with 83% of the weighting. Mid-caps are about 10% and small-caps are around 6.7%.
• The expense ratio is 0.62%.

The Latest News

• For the first time in 14 months, Russian manufacturing grew in September as new business and output expanded, reports Alex Nicholson for Bloomberg. Moscow-based bank VTB Capital reported the Purchasing Managers’ Index advanced from 49.6 to 52 last month. A reading above 50 means growth.
• The Russian economy is dominated by resources and banking, comments Levi Folk for Financial Post. Thanks to OPEC production quotas, Russia is now the largest oil producer globally.
• Economists believe Russia’s GDP growth may gain a foothold as soon as the fourth quarter because of fiscal stimulus. Additionally, the economy will pick up speed once oil prices increases and world economies recover.
• On Sept. 29, the Central Bank reduced its main interest rate to prod lending.

In September, Russia contracted at its slowest monthly pace this year, with an annual economic drop of 4.1% in the third quarter, reports Alex Nicholson for Bloomberg. Total activity index increased to 54 from 52.2, signaling an acceleration in Russia’s recovery.

Despite the growth, Russia has many challenges ahead:

• A negative factor remaining in Russia’s economy is the rate of joblessness. Unemployment stood at 7.8% in August.
• Russia’s political structure has been weakened to the point that a set of independent institutions by a closed elite would rule with little interest in reform, argues Andrew Wood for Business News Europe. Despite dissenting voices, little has been done to galvanize a systematic modernization in Russia.
• The Russian government is hoping that global growth will prop up commodity prices. There is a risk that said growth may not be sufficient to cover Russia’s reserves, and Russia’s failure to expand on domestic production could weaken its resource-based growth model. (Read about Russia’s relationship with oil here).

U.S. Secretary of State Hillary Clinton will visit Russia this week to meet with Foreign Minister Sergei Lavrov and Russian president Dmitry Medvedev, according to Jeff Mason for Reuters. The meeting will go over issues that include:

• Replacement for the Strategic Arms Reduction Treaty
• Plans for a missile shield in Eastern Europe
• A commission that covers arms control, energy, nuclear energy, fighting terrorism and drug trafficking, and aid toward business and science
• Talks regarding Iran and Tehran’s nuclear plans
• Strategy on Afghanistan

• Market Vectors Russia ETF (NYSEArca: RSX): up 131.5% year-to-date; up 13% in the last week

For more information on Russia, visit our Russia category.

Max Chen contributed to this article.

• For the first time in 14 months, Russian manufacturing grew in September as new business and output expanded, reports Alex Nicholson for Bloomberg. Moscow-based bank VTB Capital reported the Purchasing Managers’ Index advanced from 49.6 to 52 last month. A reading above 50 means growth.
• The Russian economy is dominated by resources and banking, comments Levi Folk for Financial Post. Thanks to OPEC production quotas, Russia is now the largest oil producer globally.
• Economists believe Russia’s GDP growth may gain a foothold as soon as the fourth quarter because of fiscal stimulus. Additionally, the economy will pick up speed once oil prices increases and world economies recover.
• On Sept. 29, the Central Bank reduced its main interest rate to prod lending.

On the flip side, Finance Minister Alexei Kudrin believes it will take three to four years for a full recovery. Standard & Poor’s stated that the Russian banking industry is “structurally weak” and still faces risks. Company loan delinquencies rose to 5.7% of total lending in September, up from 5.3% the previous month, and the ratio for consumer loans increased to 6.2% from 6%.

The country’s economic output may remain below trend for the next several years as the government tries to mend the shortfall from its collapsed economy by spending.

• Market Vectors Russia ETF (NYSEArca: RSX): up 109.6% year-to-date

For more information on Russia, visit our Russia category.

Max Chen contributed to this article.

Because of the Russian economy’s dependence on oil, the economy there has been hit harder than those of most other emerging markets. Natalia Vasilyeva for the Associated Press reports that analysts warn that while a recovery is in the works, investors should expect growth to be slow and cautious at best.

Russia’s gross domestic output rose 7.4% in the April-June period compared to the first quarter, although it is still down 10.9% compared to a year ago. The government is going to borrow from abroad this year to cover the deficit, as reserves are dwindling and banks are threatened by rising bad debt.

Vitaly Klintsov, Irene Shvakman, and Yermolai Solzhenitsyn for McKinsey Quarterly reports that the days of easy expansion and growth are gone, and that the country needs to broaden its horizons beyond the old standbys on which it relied for growth (namely, oil). Russia must grow by making better use of labor and capital resources, or, in other words, encouraging higher productivity. This is paramount, because Russia’s labor force could shrink by as much as 10 million people by 2020.

• Market Vectors Russia (NYSEArca: RSX): up 107% year-to-date

For more stories about Russia, visit our Russia category.