A stock that doubles in three months typically isn’t considered cheap. But on a fundamental basis, Van Eck’s Market Vectors Russia (RSX) is still a bargain for the long term investor, despite its 101% return since February.

The Russian market tanked last year as the global recession hit Russia’s growth prospects and crude oil’s spectacular fall destroyed the earnings potential of the Russian stock market. In 2008 the benchmark RTS Index fell a record 76%.  The selling was driven by stong fundamental factors – high corporate debt levels built up during the boom times proved crushing when oil prices fell. But much of the sell off was also driven by one-off redemptions and pure panic. Fearing a repeat of 1998, investors fled rouble assets in fear of a full blown currency crisis that never arrived. And when oil and gas prices stopped falling, major producers like Gazprom (MCX:GAZP) and Rosneft (MCX:ROSN) suddenly looked undervalued.

In the long run the Russian economy faces severe demographic and political challenges which will harm its growth potential to a greater degree than other emerging markets. But its stockmarket is driven by price of crude more than by the GDP numbers, and crude oil is an increasingly scarce resource with soaring emerging market demand and scant supply. In 15 years when the Russian population begins to shrink at a frightening rate and viable alternatives to petroleum fuels finally exist, Russia will be a poor place to invest without significant political change. But for the next decade at least, it is likley to return excellent hydrocarbon powered profits.

Blackrock, for one, is reported to be buying with both hands. But you don’t need to be a sophisticated asset manager to get broad market exposure through the RSX.

Despite its performance this year, the fund is still 60% off its pre-crisis highs. Even if those levels were a little frothy, there is still significant room for upside in the Russian equity recovery.