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Did Putin Just Score Us a Goldmine?

A year ago, the infamous “Arab Spring” was in full bloom, as Tunisia, Egypt and Libya all underwent seismic political revolutions.

Now it’s time to get ready for Act II. It won’t come from the Middle East, though. Instead, Russia will soon take center stage.

Political protests across the country are heating up.

Put simply, Russians are tiring of Vladimir Putin’s decade-long death grip. And the beleaguered leader is about to enter the biggest power struggle of his life.

Presidential elections are looming, with Putin determined to retain command. But in a climate of “people power” and uprisings, it makes for a potentially explosive situation.

For investors, however, it’s a perfect moneymaking opportunity…

Russia’s Political Circus

It’s no secret that Putin and his cronies have ruled Russia through economic suppression. That being said, his long-standing strategy of doling out state assets to oligarchs – ones that support his plan for a benevolent dictatorship – has finally come full circle.

Those same oligarchs that Putin enriched are now challenging his rule.

Last September, Putin announced that he was running for the Russian presidency. Prior to Dmitry Medvedev’s election as President in May 2008, Putin had served two terms as President, but was unable to run for a third, as the Russian Constitution limits the presidency to two terms.

It wasn’t for lack of trying, though. Putin attempted to amend the Constitution, but when the bid failed, he became Prime Minister instead, and his puppet – Medvedev – stumbled forward as President.

With Medvedev’s presidential term expiring, it’s no surprise that Putin is running again. In fact, Medvedev nominated him, saying it was a pre-arranged agreement. In turn, Putin backed Medvedev for Prime Minister.

The upcoming election is in March – and Putin is expected to win. Talk about a sham.

Is Putin’s Power Grab Finally Over?

Empowered by the Arab Spring and Occupy Wall Street, Russians aren’t buying it. Violent mass protests – the biggest since the fall of Communism – are engulfing Red Square.

Even former President, Mikhail Gorbachev, is calling for Putin not to run. However, Putin’s bigger threat comes from multi-billionaire oligarchs that control 90% of Russia’s wealth – and they’re scheming to bring him down, too.

Take New Jersey Nets owner, Mikhail Prokhorov, for example. He announced intentions to run for President, which holds some clout, as he’s the world’s thirty-second richest man.

Prokhorov made his fortune in metals, courtesy of his ties with the Kremlin. He engineered the takeover of Norilsk Nickel when state enterprises were being doled out to the people.

Such state assets were dispersed in the form of ownership vouchers, given to Russians. However, their mass distribution – in lieu of actual cash – made them virtually worthless. That is, unless one group could buy them all.

That’s exactly what happened…

“New Russia”… Same Old Story

Backroom deals with the government allowed a select few oligarchs to buy the majority of shares.

The result was a defacto takeover of former government enterprises by individuals covertly connected with the government. In return, the oligarchs agreed not to challenge any action.

The price for dissention? Just ask Mikhail Khodorkovsky. In 2004, Forbes listed Khodorkovsky as the world’s sixteenth richest man through his ownership of natural resource giant, Yukos. But he’s currently rotting away in jail on tax evasion charges.

His real crime, though? In a televised 2003 meeting at the Kremlin, Khodorkovsky argued with Putin over government corruption. Enough said.

As for the upcoming presidential election, expect market convulsions.

As a major oil producer, if Russia tanks, the shockwaves won’t just ripple through its own market, but the oil industry and global markets, too. But it would also hand us one of the biggest speculative plays of this decade.

The smart money is moving into an opportunity currently trading at an 8.5% discount to its net asset value (NAV), which means you can buy $1 worth of assets for $0.91. But it could get cheaper still…

If Putin wins the presidency without promising concrete reforms, Russia will implode. That could see this opportunity trade at a discount of over 20% – a historic buying opportunity!

With Russia, the old adage to “buy when blood is in the streets” is in play… big-time.

The country is on the brink – and that means the opportunity of a lifetime for investors willing to take a plunge.

For current subscribers of The White Cap Report, consult pages 4 and 5 of the latest issue for the name of this incredible play.

Until next time,

Karim Rahemtulla