Citi: Politics blinds world to Russia's economic rise

Michael Klein, chairman of one of Citigroup Inc's four main divisions, said many investors did not view Russia like Brazil, India and China -- the other leading emerging markets which with Russia make up the so-called "BRIC" nations.

"While there is clearly a BRIC definition, there is however one country that unfortunately is consistently viewed not from the BRIC economic lens but with a political lens and that is Russia," he told a panel at a Russian investment forum.

"The Russian economy is largely invisible -- when you have an export economy that is 85 percent basic materials and not brands, not consumer goods, not food, not automotive, the high street and the main street do not understand the Russian economic power that has been achieved," Klein added.

Russia is booming for a tenth straight year and flush with cash because of record prices for its biggest exports -- oil, gas and metals -- and soaring consumer demand.

Unable to pay its debts in 1998, Russia now has the third biggest foreign exchange reserves in the world and the Kremlin has urged Russian companies to snap up assets globally.

Klein, who used to be Citigroup's chief investment banker for Europe, the Middle East and Africa, said in a panel discussion at the annual St Petersburg Economic Forum that Russia and its firms should take advantage of their wealth.

"You must recognize that when your economy grows at 8 or 9 percent in real terms and the U.S. and Europe grows at 0 to 1 percent, as you have substantial liquidity today and the liquidity is constrained in other markets there is a very important near-term opportunity," Klein said.

"There is no reason why we should not see substantial development in the cross-border development of companies here in Russia on a global scale."

Gulf Arab states and companies, buoyed by record oil prices being paid to the world's largest oil-exporting region, spent about $60 billion on foreign assets last year, almost double the previous two years combined.

But compared to China and the Gulf, Russian firms and its sovereign wealth fund have so far been slow to make aggressive moves overseas.

Klein, who heads Citi's Institutional Clients Group, declined to answer a question on whether Citigroup would ask Russia to buy a stake in the bank, which turned to Middle East investors to raise capital after suffering huge losses.

State-run Abu Dhabi Investment Authority agreed in November to buy $7.5 billion of stock in Citigroup.