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Exxon Mobil (NYSE:XOM) has entered into an agreement with Rosneft (OTC:RNFTF) to jointly explore for oil in the Russian Arctic sea. According to the Financial Times, this deal:

"underscores international oil companies' determination to explore and develop the Russian Arctic, one of the few places in the world with large, untapped oil and gas reserves...".

The agreement calls for both companies to invest $3.2 billion dollars for exploration and $450 million dollars to be invested in a St. Petersberg research center. The FT article quotes Rex Tillerson, the CEO of Exxon Mobil, saying the "agreeement represented 'a significant strategic step by both companies.' He added that Exxon had been encouraged by the Russian government's pledge to reform oil taxation and improve investment conditions for foreign and Russian oil companies." Igor sechin, the deputy prime minister of energy, is cited by the FT article saying that "the Exxon-Rosneft agreement foresaw $200-$300 billion in direct investment over ten years."

So what? Who cares? Evidence of this sort highlights the fact that Russia represents a compelling investment opportunity for those willing to accept some additional risk. Investments in Russia will likely be rewarded, over the medium and long term, as Russia takes steps to positively reform their economy and government, even though one cannot expect improvements overnight. Companies like Exxon would not be willing to invest in Russia if they did not consider such an investment to be a great opportunity for its shareholders.

On August 20th, I posted an article posing the question, "Is it time to take a punt on Russia?" The article was oriented around recent economic data on manufacturing and investment, which remains positive for the Russian economy. The economics of Russia are improving on many fronts, which, is more than can be said for the U.S. economy at the current time. Investors searching for international growth opportunities should consider a modest investment in Russia as a play on an economy that is improving overtime - not to mention exposure to global energy/commodity demand.

An investment in Market Vectors Russia ETF (RSX) still has a good risk/reward, even after it has moved up $2 dollars per share since my August 20th article. RSX could easily find its way to $35-$40 dollars per share if the "risk on" trade comes back into the market after the recent sell-off. RSX will also benefit from strong commodity prices generally speaking as global commodity demand continues to stay relatively strong. With a stop loss around $27.50-$28 dollars per share, I believe RSX represents a compelling risk reward opportunity on a developing economy.

Source: Punting On Russia: So Far So Good, And Slowly Getting Better