By Jason Bush The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

MOSCOW — The Libyan conflict has widened the rift between Dmitry Medvedev and Vladimir Putin in what could be a turning point for Russia’s political future.

Medvedev broadly supports the Western position on Libya, and has ensured that Russia simply abstained, instead of using its veto power, over the U.N. Security Council resolution for a no-fly zone. Putin, on the other hand, has called the resolution “fundamentally mistaken”.

This earned him a surprisingly strong rebuke from the president, in the strongest sign yet that disagreements between the two leaders are far from superficial, contrary to popular Western belief. In fact, the ideological divide separating them becomes clearer by the day. The division of power has been unstable and unclear for a while. Turf wars between their respective staffs are routine, and the voicing of their disagreements have become more common.

Medvedev has positioned himself as a champion of liberal values, seeking to align Russia with the West to attract investment and has made statements about the necessity for his country to abide by the rule of law. Putin, on the other hand, has echoed the views of Russia’s security and foreign policy establishment, deeply-rooted in the old Soviet mistrust of Western intentions.

Medvedev’s put-down of his prime minister shows not only that he can make his own decisions — his view, after all, prevailed in the Libyan case — but that he feels he’s ready to fight the fight.

The Russian president is now facing a backlash from conservative officials. But few should doubt that he intends to run for a second term next year. The big question is what Putin thinks about Medvedev’s ambitions. He has previously hinted at returning himself to the Kremlin. Lately, it has seemed more likely that he won’t, instead giving a freer rein to Medvedev.

By Jason Bush The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

MOSCOW — A bomb attack on Moscow’s Domodedovo airport has killed dozens and injured many more. Although the precise details may not be known for some time, the attack represents a nasty development because it underscores an unpleasant truth. Security threats in Russia have become an international problem.

The choice of target, Russia’s busiest international airport, seems calculated to cause maximum economic disruption and create high-stress political fall-out at home and abroad. News of the bombing immediately knocked 2 percent off Russia’s MICEX stock exchange and 4 percent off the share price of national airline Aeroflot.

The experience of previous bomb attacks suggests that the impact on financial markets will be temporary. Such incidents are, sadly, not new in Russia. It is less than a year since 40 people were killed in twin bombings on the Moscow metro, and previous years have seen many such attacks on civilians in Moscow and other Russian regions.

As with these other atrocities, suspicion for the latest bombing falls on Islamic insurgents from the North Caucasus, though no one has yet claimed responsibility. Whoever is to blame, the Domodedovo attack represents a worrying escalation. By bombing a major transport hub, the attackers have for the first time taken aim at a target used by foreigners as much as Russian citizens. Domodedovo is the destination for global airlines such as British Airways and Lufthansa, and is one of the main points of entry for tourists and business visitors.

It may be no coincidence that the attack on Domodedovo has taken place in the same week as the Davos Economic Forum, where President Dmitry Medvedev is due to lead Russian efforts to woo international investors. Concerns about Russia’s volatile investment already abound. These will only rise as a result of the deepening personal and business risks highlighted at Domodedovo.

Political risks are not confined to Russia, and foreign investors are likely to show resilience: just as they have when confronted by similar incidents in other countries. Russia’s economy has also shaken off past violence, but this attack is serious — in human, political and economic terms — because it raises global fears.

Decision at last. For weeks, Russia has been gripped by the mayor of Moscow battle. The Kremlin’s choice has finally settled on Sergei Sobyanin, a close aide of premier Vladimir Putin. That says a lot about where real power in Russia lies.

The battle between Dmitry Medvedev and outgoing mayor Yuri Luzhkov was always about more than the government of Moscow. By sacking the intransigent mayor, who had criticised him in public, the Russian president showed that there were limits to how far he could be pushed. The fact that Putin was unusually silent on the matter added to the impression that Medvedev was at last beginning to take charge.

But the limits on Medvedev’s power are now obvious. The president can fire, but he apparently can’t hire. Sobyanin’s close links with the Russian premier stretch back a decade, including a stint as head of Putin’s presidential staff. Such a conservative choice belies the notion that Luzhkov’s departure heralds major political changes.

True, any change is probably for the better after Luzhkov’s 18-year rule. But the problems of corruption and nepotism that contributed to Luzhkov’s downfall are endemic to Russia, and not confined to Moscow. At least Medvedev has given some indication that he wants to change the system. Although no revolutionary, Putin’s younger protege has shown a greater interest in pushing reforms. His major initiatives, such as plans for a “Russian Silicon Valley”, have even stirred some investor interest.

But it will be difficult for Medvedev to push his reform plans as long as he so clearly plays second fiddle. The risk is that if Putin continues to control key appointments, preventing infusion of new blood into the political elite, Russia will stagnate. Some Russian analysts warn of a return to the complacent gerontocracy of the 1970s Brezhnev era.

The real test of that will come in 2012, the date of the next presidential election. There is widespread speculation that Putin will run again, shunting Medvedev aside. His determination to control the Moscow mayor appointment can only fuel such rumours. What’s clear for now is that Putin alone has the power to decide.

Russia’s stock market has languished this year, as investors took fright over events in Europe. While this lacklustre performance mirrors other emerging markets, Russia’s cheaper valuations mean it is better placed to bounce back.

Russia now looks like a bargain on both a historic and geographic basis. Its market is still 40 percent down on two years ago — much more than the 15 percent decline in the MSCI Emerging Markets Index. Russia is now around 40 percent cheaper than its peers on a price/earnings basis: it is trading at 6.6 times expected 2010 earnings, compared with an 11.5 average for emerging markets, reckons Renaissance Capital. This discount has widened from around 30 percent at the start of the year, not far from the long-term historic average.

Although Russia deserves a discount because of its political risk and the fragility of its oil-based economy, the gap is starting to look excessive. After all, Russia has seen a far bigger GDP turnaround than other countries — after shrinking 7.5 percent last year, it is now growing at around a 5 percent rate. Morgan Stanley predicts Russian corporate earnings will increase 50 percent this year, twice as fast as in China.

So why aren’t investors snapping up Russian bargains? The answer lies outside Russia, home to many buyers of the free float of these stocks. They fear a double-dip global recession and another tumble in the oil price, by far the most important factor for Russia’s stock market. And investors remember that the Russian stock market lost 80 percent of its value in six months in 1998.

But the bullish oil price forecasts out there could prove half-way right. And even if Russia’s market does tank again, there is a comforting factor. Russian oligarchs aren’t as heavily leveraged as they were two years ago, so they would have less need to raise collateral in a hurry by selling shares.

Taken together, these factors mean that Russia’s cheap shares could be positioned for a nice rebound if global risk appetite recovers a bit. Investors who dally could miss a bounce.

Russian initial public offerings are set for a comeback. Some $20 billion of Russian share sales are forecast this year, including dozens of IPOs. With plenty of options, investors should be able to drive a hard bargain.

Following a two-year lull in activity, bankers are excited at the prospect of a return to the heady days of 2006 and 2007, when Russian companies raised some $37 billion in 42 international share issues. Media group Profmedia plans to raise $500 million in April with a London listing, while iron ore miner Metalloinvest and coal miner SUEK are mulling billion-dollar IPOs in 2010.

Russian new issues have been understandably popular with investors in the past. They tend to be sizeable and offer exposure to high-growth sectors. The Russian stock market also appears less expensive than other emerging markets on some measures.

But issuing companies’ bosses often have inflated estimates of what they are worth. Around two thirds of all Russian IPOs have underperformed the local stock market since issue date, in some cases losing 80 percent of their value, according to data compiled by Renaissance Capital.

That suggests the prices of previous Russian IPOs were too high. This time, it should be different. Aside from the sheer number of possible candidates, many Russian companies are under pressure to raise money quickly. They borrowed heavily before the crisis and need cash fast.

Uralsib Capital estimates that Russian companies will issue $55.5 billion of equity in 2010 and 2011, of which $17.5 billion is required to repair balance sheets. The Profmedia IPO, for instance, would help repay some of parent company Interros’s $2 billion of debt. With local finance still scarce and expensive, smaller and less indebted Russian companies also need to raise equity to kick-start stalled expansion plans.

Investors during the last wave of Russian IPOs were too willing to stump up cash. This time, it should be more of a buyer’s market.

Tucked away on page 4 of the Moscow Times today there is a remarkable article which made me wonder whether I wasn’t hallucinating.

The report states matter-of-factly that several branch managers are being investigated for defrauding $1.2 billion from Sberbank, Russia’s largest bank. That’s according to comments made by Sberbank’s regional manager for Moscow. The Moscow Times translated the article from Thursday’s edition of the Russian newspaper Vedomosti, where it appears on page 7.

According to this article, Sberbank suspects managers at three Moscow branches of doling out “thieving” loans, on the basis of “fictitious” documents, to “dubious” companies. The scale of the resulting losses at these three branches? “More than 35 billion roubles” ($1.2 billion).

When you include similar goings-on at other branches, the total figure for Sberbank’s “dubious” loans appears to be even higher still: 46.1 billion roubles, or some $1.6 billion. That it is more than double Sberbank’s total profits for last year.

This isn’t the first time that I have seen reports about fishy goings-on at the Sberbank. The fraud allegations first trickled out last summer (back then the allegations concerned just a single branch, and the figure for the losses was a mere $180 million). The news attracted so little attention it was hard to know what to make of it.

Welcome to the often surreal nature of modern Russia. The muted reaction brings to mind several other major fraud scandals over recent months that have been treated in an equally off-hand fashion.

Last April, for instance, a Moscow court convicted a certain Viktor Markelov for stealing 5.4 billion roubles ($180 million) from the Russian budget. Yet it wasn’t until December – seven months after Markelov’s conviction – that Russia’s state news agency RIA-Novosti reported on the case. It wouldn’t have attracted any attention at all, but for the scandalous death in prison in November of Sergei Magnitsky, a lawyer for the hedge fund Hermitage Capital, who had accused several police officers of complicity in the fraud.