MOSCOW - (Reuters) - It's deja vu all over again: Russia's stock market has been the worst performer of the BRICs (Brazil, Russia, India, China) in the latest global sell-off, even though this has been triggered by the West's sovereign debt crisis and not Moscow.





But is it deja vu? Although Russian stocks lost nearly a fifth of their value last month, investors who fled in the 2008-09 crash now regard Italy as a greater sovereign-default risk, judging by the cost of buying insurance on Italy's government debt.

As so often in the 20 years since the break-up of the Soviet Union, perceptions diverge, creating uncertainty as Russia prepares to choose a leader to take it into its third decade.

Russia's promoters point to economic growth of 4 percent and a fortress balance sheet, with sovereign debt of around 10 percent of gross domestic product and half a trillion dollars in reserves, as compelling reasons to buy Russia.

Russia's dollar GDP will double to $3.2 billion in the five years to 2015, based on International Monetary Fund forecasts. That is faster than China, says Roland Nash, senior partner and chief strategist at hedge fund Verno Capital.

'If you have that kind of growth, then now is a great time to invest,' Nash told a panel debate ahead of Reuters Russia Investment Summit in Moscow next week.

Sceptics, however, view Russia as a petro-state dependent on oil and gas revenues to finance half of its budget and would, on the reckoning of Finance Minister Alexei Kudrin, balance the books next year only if the oil averaged $116 per barrel.

Then there is the 'Putin discount' that reflects investors' concern that a return to the presidency next year by the man who held Russia's top job from 2000 to 2008 could mean a new era of stagnation.

Dmitry Medvedev, president since 2008 after the constitution barred his mentor seeking a third successive term, has made clear he would like to stay on. Critics say he has failed to make progress implementing his reform and modernization agenda.

'Russia is facing decline -- it is the Brezhnev way or the Gorbachev way,' economist Sergei Aleksashenko, who has held top positions at Russia's finance ministry and central bank, told the panel debate.

Leonid Brezhnev's long term as Soviet leader ended in stagnation whereas Mikhail Gorbachev carried out extensive reforms, only for the Soviet Union to collapse.

POLICY DIFFERENCES OVERDONE?

A Putin comeback would be a retrograde step that would revive memories of the Kremlin's breakup of oil company Yukos, said Bernard Sucher, a board member of brokerage Aton and a co-founder of Moscow's oldest brokerage, Troika Dialog.

'A return of Putin will signal a defense of the legacy from his second term, not the hopes of his first term,' said Sucher.

Yukos was broken up and sold off after its owner, Mikhail Khodorkovsky, fell out with the Kremlin.

Last week's landmark deal between Exxon and state-controlled Rosneft to search for oil in the Arctic, one of the world's last energy frontiers, demonstrated Putin's ambitions to strengthen Russia's role as a global energy superpower.

Medvedev failed to use a keynote policy speech this week to lay out a positive vision for Russia, painting a dystopian picture of social and political fragmentation that needed to be avoided at all costs.

Some analysts say policy differences between the prospective candidates are exaggerated, and clarity over which of the two will run next March will lead investors to look again Russian stocks that trade at a price-earnings ratio of just 5.

'The Western world needs the theatrical narrative to follow Russian politics. Our view is that there isn't that much difference between them,' said Liam Halligan, chief economist at Prosperity Capital Management.

To help make sense of these issues, more than 20 policymakers, executives and investors will give exclusive interviews to the Reuters Russia Investment Summit next week.

Topping the bill is finance minister Alexei Kudrin, who has steered Russia through boom and bust during more than a decade in office and been tipped as a possible prime minister if Vladimir Putin returns to the presidency next March.

Also taking part are Alexander Medvedev, head of the export arm of the world's largest gas company, Gazprom (GAZP.MM), and Vladimir Potanin, main shareholder in Norilsk Nickel (GMKN.MM), the top producer of nickel and palladium.

The two leading Russia-focused equity funds, Prosperity and East Capital, and Blackrock, the world's largest fund manager, as well as top investment bankers, will also be speaking.

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