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Russia has been hard hit by the current economic crisis and especially by the decline in oil prices this year. According to Economics Ministry data, Russia's GDP declined by 9.3% in July 2009 year-on-year and 10.2% in the first seven months of the year. Energy products, including crude oil and natural gas, accounted for 65.5% of exports in the first half, while metals made up 12.1%.

According to Finance Minister, Alexei Kudrin, the Russian economy will be on the rise again as early as in the third quarter of 2009.

"We still do not have the final data for the second quarter, but we expect Russia's economy to grow in the third quarter compared to the second quarter, and the third quarter will mark the end of recession," Kudrin told a news conference whilst in London attending the G20 summit

Russia has recently raised forecasts for the price of oil and is now looking at revising its views on gross domestic product (GDP), Kudrin said last week. The Economy Ministry now sees Urals oil averaging $57 a barrel this year, up from the $54 forecast previously and the average price of crude is projected to increase gradually to $58 in 2010, $59 in 2011 and $60 in 2012.

With 40% of the Market Vectors Russia ETF Trust (NYSE:RSX) predicated on energy, it is plain that energy prices need to remain stable if not advance in the light of the news above, if it is to become more attractive to risk averse investors. Trading at $23.54 off of a 52 month low of $10.34, it is still a long way off of its high of $40.75.

Standard and Poors retained its BBB rating on Russia last Thursday, which would seem to allay some fears, as it was widely expected that the rate would be cut. The ratings agency also noted that by the end of 2012, with net debt levels at 14% of GDP, Russia's public balance sheet remains superior to the BBB rating median of 42% of GDP.

The government is also now tapping its $85.7 billion Reserve Fund and $90.7 billion National Wellbeing fund, which were built on windfall oil revenues, to pay for an “anti-crisis” program that is worth about 2.5 trillion rubles ($79 billion).

Personally, I am positive on Russia long term and feel that this ETF offers value for a long term portfolio. Year to date it has returned 75.4% and I reckon it has further to go. Lately it has been trading in a choppy pattern and has suffered a significant retrace, but with S&P confirming its rating, I'll be looking closely at the price of crude and natural gas over the next month or so; any gain there and I'll be adding with an expectation of an additional 25% gain this year.

Disclosure: Author holds a long position in RSX

Source: Kudrin Upbeat on Oil: Good News for Russia ETF?