Russia foreign investors unfazed by rows with West

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But head of Fitch emerging Europe sovereigns Edward Parker said an increase in tension between Russia and the West arising from Georgia could ultimately impact Russian firms by pushing away investors already made wary of risk by the credit crunch.

"They have quite significant private sector amortisations (debt) falling due and this could make it more difficult to refinance," he said, making any conflict with Georgia potentially more significant than Russia's long-running war in Chechnya, which had almost no investor impact.

For some investors, the risk of conflict with its neighbours is one of the factors that makes Russia less attractive than some other key emerging markets.

"Conflict with its neighbours is a concern that makes it a less appealing investment destination than, for example, Brazil where you have the growth story without the political risk," said Jason Hepner, investment director for global strategy at Standard Life Investments.

"UNAPPEALING HEADLINES"

Standard Life does not break down investments publicly, but manages some $280 billion globally including in Russia.

The transition of power from the President Vladimir Putin to his anointed successor Dmitry Medvedev, sworn in this week, is seen making relatively little difference with Putin still Prime Minister.

The successful succession prompted a stock market rally, but investors say their background concerns include respect for the rule of law and property rights as well as the extent of corruption.

Some investors say that after the arrest and imprisonment of Russia's richest man Mikhail Khodorkovsky and dismantlement of his multibillion-dollar oil company YUKOS, they have become hardened to political risk and still see good potential profits.

But since then, most have steered clear of the oil and energy field, preferring to target investments on other sectors such as construction and retail to tap wider growth - seen less likely to attract state intervention.

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