Johan Edfors, Jose Manuel Carriles and Kalle Brink finished two shots off the pace at 9-under-par 135.
Fraser got off to a quick start at Le Meridien Moscow Golf & Country with birdies on each of his first two holes but went on to par his way through the rest of the outward nine to make the turn at minus-6.
The 25-year-old, who has two Challenge Tour victories in 2003, caught fire on the back nine. Fraser picked up back-to-back birdies starting at the par-3 11th and went on a run of three consecutive birdies beginning at the par-5 15th to surge into the lead courtesy of a new course record.
'I've won twice on the Challenge Tour this year and to win a dual ranking event such as this would obviously open up a lot of windows for next year,' said the Australian, who bested his career low on the European Tour by two strokes. 'I just need to keep plugging along and see what happens at the end of the week.'
Elson played the back side first and opened with two birdies and a bogey over his first five holes. He tallied a birdie at the 18th and picked up steam around the turn with birdies at one and two to make it three in a row.
The Englishman added a birdie at the par-4 sixth and closed his round with back-to-back birdies from the eighth for a 65 of his own.
'I find it quite hard to look at myself and think that I'm going to make it and all the rest of it,' said Elson, who was a member of the winning Walker Cup team in 2001. 'Most of my friends say to me that I'll get my European Tour card for next year but I tend not to think about all that and just go out and play.'
Andrew Coltart shot a 5-under 67 to finish in a tie for eighth with Mark Davis, Renaud Guillard and Joakim Rask at 8-under-par 136.
Jose Manuel Arruti, Pasi Purhonen and Robert Rock where one shot further back at 7-under-par 137.
First-round leader Nicolas Vanhootegem managed an even-par round of 72 to finish in a group at 6-under-par 138.
The 36-hole cut fell at 2-under-par 142 with 77 players qualifying for the weekend.
This event features players from the European Tour and the Challenge Tour. This is the tournament's first year on the European Tour.