Russia, from bust to boom. What now?

By Douglas Busvine

MOSCOW (Reuters) - Russia has gone from bust to boom in less than a decade to become one of the world's most dynamic emerging markets.

Since the devaluation and default of 1998, Russia's gross domestic product has surged to $1 trillion, its economy is growing at a clip of over 7 percent and an expanding middle class is enjoying prosperity unimaginable in the Soviet era.

But, reflecting the national emblem of the two-headed eagle, the resurgence of the world's largest country has fuelled a new assertiveness that has unnerved the West.

Gas supply cuts to Europe, the unsolved murder in London of a Russian ex-security agent and murky Kremlin intrigues all make Russia as hard to read now as the Soviet Union when Churchill called it "a riddle wrapped inside a mystery inside an enigma".

Over a dozen top executives and policy makers will help unravel the mystery at the first Reuters Russia Investment Summit, from September 10-11, in a series of exclusive interviews.

Will Russia stay open to investors after what promises to be a carefully orchestrated succession to President Vladimir Putin next year? Will it be a fast-forward path to growth -- or more a case of 'back to the future'?

"Everyone wants to see a smooth transition," said Roland Nash, head of research at Renaissance Capital. "But in today's Russia, having a strategy and implementing it are two different things."

Although there are several presidential contenders, none is as popular as Putin, and he is likely to retain vast influence even after voters elect a successor in March 2008.

The latest speculation is that Putin may chair a strengthened Security Council, reviving a variant of the dual Soviet power structure under which the Communist party general secretary enjoyed far more clout than the country's president.

UNFINISHED BUSINESS

In the meantime, the Kremlin has some unfinished business to complete as it pushes to regain control over the 'commanding heights' of the economy -- Russia's vast natural resource base.

Western oil majors have been forced to cede control of energy projects to gas monopoly Gazprom (GAZP.MM: Quote, Profile, Research, Stock Buzz), the world's largest gas company. State-controlled Rosneft (ROSN.MM: Quote, Profile, Research, Stock Buzz) has scooped up the assets of fallen oil firm YUKOS, whose founder now languishes in a Siberian penal colony.

Another oil industry boss, Mikhail Gutseriyev, is on the run and his company, Russneft, is likely to be bought by Kremlin-friendly oligarch Oleg Deripaska. Russia watchers are asking the question: Who's next?

Analysts don't rule out ownership changes at TNK-BP, British oil major BP's (BP.L: Quote, Profile, Research, Stock Buzz) Russian venture, Russia's No.4 oil firm Surgut (SNGS.MM: Quote, Profile, Research, Stock Buzz) and even Norilsk Nickel (GMKN.MM: Quote, Profile, Research, Stock Buzz), the world's largest nickel producer.

But, they say, any asset grabs by 'Kremlin oligarchs' are likely to be less disruptive than when Boris Yeltsin's clan lost its grip on power in 2000.  Continued...