Economic fallout on Russia seen short-lived

By Gleb Bryanski and Toni Vorobyova

MOSCOW (Reuters) - The political fallout from the Russian incursion into Georgia may be great in terms of Moscow's relations with the West, but the impact on its asset classes looks set to be short-lived.

For while a decade ago Russia plunged into a financial crisis while the memory of a military defeat in breakaway Chechnya was still fresh, ever since the country has enjoyed economic growth fuelled by its massive oil reserves.

And this month when Russia sent tanks into NATO aspirant Georgia ignoring an international outcry, it boasted $0.6 trillion of forex reserves.

Russian stocks bounced back from near-two year lows on the first signs of resolution of the conflict , and analysts recommended that investors re-enter long rouble positions.

Many investors have been lured to Russia by the high oil price -- now roughly ten times higher than in 1998 and not expected to fall. That has also given Russia's leaders grounds to believe they will be sitting on the cash pile forever.

They unilaterally pressed on with military action in Georgia and have since shrugged off the prospects of losing their place in the Group of Eight rich nations or being blocked from joining the World Trade Organisation.

"This is part of the oil curse," said Anders Aslund, senior fellow at Peterson Institute for International Economics and a former adviser to Russia's first reformist government in the early 90s.

"Russia is treading in the wrong direction, away from the integration with the West."