Despite the potential for more international sanctions on Russia, some investors and market analysts have argued there is value to be found in the country – but only for those prepared to handle the volatility.
Sanctions on Russia, which were imposed by the West after the country's annexation of Crimea and role in the conflict in east Ukraine last year, could soon be extended, U.S. Treasury Secretary Jack Lew said Tuesday.
It comes as a ceasefire between the two countries -- known as the Minsk agreement -- looks shaky, with an uptick in violence in the region over recent weeks between the Ukraine military and pro-Russian rebels.
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Should sanctions be extended further, Russia's economy could be in for a repeat of 2014's rollercoaster ride, when its currency and stocks were hit hard by declining oil prices, capital outflows and soaring inflation.
Potential and pitfalls
Despite this uncertainty, however, some market participants argued there were "bargains" in Russia.
"There is significant opportunity here. The one thing with Russia is that it generally goes from being the worst (performing) stock market to the first stock market in a very rapid rate," Simon Fentham-Fletcher, chief information officer of Freedom Asset Management, told CNBC Europe's "Squawk Box" Wednesday. His company specializes in investment in emerging markets, such as Russia.
Certain sectors – such as retail and real estate – were thriving, Fentham-Fletcher said, speaking from Moscow.
However, he did say the ruble could see further deterioration after a brief recovery against the dollar of late. It is currently trading around 55 to the dollar -- a far cry from its weakest point in January this year, when it traded around 70 to the greenback.
"We've had a lot of the ruble being propped up by many quasi-state companies exchanging dollars for rubles, but I think that will slow down now," Fentham-Fletcher added. "Before, there was panic on the streets here with people queuing up at kiosks to change money, but that's declined and generally, Russia feels comfortable now."
This sanguine approach to sanctions by many Russian citizens is due in no small part to the Russian government's attempts to turn the crisis into an opportunity -- using it to promote patriotic values, goods and services.
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The Russian economy ministry now expects gross domestic product (GDP) to shrink by 2.8 percent in 2015 -- a smaller contraction than initially forecast – and the World Bank earlier this month also raised its growth forecasts for the country.
Buyer beware
Senior Market Analyst Craig Erlam, from currency trading firm OANDA, told CNBC that "the argument against investing in Russia is becoming increasingly difficult as the country does appear to be stabilising."
But he did stress there was plenty of risk involved.
"Inflation has probably peaked and is on the decline, oil prices have bottomed and rebounded strongly from those lows and fighting in Ukraine has eased, although flare ups do continue to happen," he said via email Wednesday.
"However, that does not mean that investing in Russia doesn't still pose a large risk and things can still take a turn for the worse."
He said that - at the very least - sanctions were likely to remain in place, meaning that Russia's economy would continue to suffer.
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"With this being the case and the risk of further sanctions being imposed, I still see plenty of risk in Russia," Erlam added. "Until the rhetoric changes from increasing sanctions to possibly easing them, I don't see a huge amount of upside potential."
Lew told Ukrainian leaders on Tuesday that the U.S. and its Group of Seven (G-7) allies were ready to impose more sanctions on Moscow, an unnamed Treasury official said, according to Reuters.
By Russia's own admission, the ceasefire with Ukraine is not holding well, with the Russia's Foreign Ministry saying in a statement Tuesday that "the process of implementation of Minsk agreements is largely still fragile."
- By CNBC's Holly Ellyatt, follow her on Twitter @HollyEllyatt. Follow us on Twitter: @CNBCWorld
