Russia has long faced challenges assuring would-be investors about its stability relative to Western and Asian nations, or even among other emerging markets. Now a series of terrorist attacks could make that challenge worse.
Two bombing attacks over a 24-hour period this week killed at least 33 people and have heightened worries that Russia may face further strikes leading up to the Sochi Winter Olympics, scheduled to begin in early February.
Alexander Kliment, emerging markets analyst and director of Russia at Eurasia Group, said that the attacks, if they continue, are likely to negatively affect investor perceptions on Russia.
"A certain amount of volatility and violence has been the norm in the North Caucasus," he said. "However, if we see sustained violence outside of North Caucasus—in 'European Russia'—that could scare investors and have an adverse effect on funds' decisions."
The attacks raise bigger questions about stability in Russia and how much ability President Vladimir Putin really has to control such situations, Kliment said.
Russia already faces low stock valuations compared with other industrialized nations. Russian stocks typically trade at below six times earnings, making the country one of the cheapest emerging markets. The S&P trades at a price-to-earnings ratio of 16.6 as of Tuesday.
Early in his presidency, Putin built a reputation as a strongman, using the military to crack down on extremist violence in the North Caucasus region.
But some investors say that strong government hand is in and of itself a problem for would-be investors in Russia. Bill Browder, CEO of Hermitage Capital Management, said governmental autocracy in Russia has already made it an "uninvestable country."
"Russia had thoroughly ruined any vestiges of attractiveness for foreign investors years ago. Anyone who is there now is there foolishly," he said. "Government officials can seize your assets without any due process—they can arrest you, torture you, kill you."
Not everyone is deterred, of course. Some fund managers believe that despite the geopolitical headwinds in Russia, investors can and should put money into select investments there.
Triogem Asset Management's Tim Seymour said he likes the opportunities Russia presents in sectors such as steel, information technology and telecommunications.
Seymour was a partner at investment banking and asset management firm Troika Dialog from 1998 to 2004 and is raising a new investment fund dedicated to emerging markets money. Russia will be one focus of that fund, he said.
Unlike other analysts, Seymour said he does not believe the attacks will distract funds from considering investing in Russian companies such as search engine Yandex, telecom company MBT and IT services firm Luxoft.
If the attacks continue, though, most would argue there's reason to be concerned.
Putin has looked at the Winter Games as an opportunity to showcase Russia's standing in the world, and the country is expected to spend upward of a record-breaking $50 billion on the event. Now, he is forced to go on the defensive and assure the global community that the Sochi Olympics, now about one month away, will be safe from terrorists.
Russian business sources who spoke on condition of anonymity told CNBC that terrorists are taking advantage of the fact that so many of the nation's security resources are now concentrated in Sochi. For the terrorists, now is an opportune time to strike surrounding areas where security might not be as tight, they said.