Why Investors Should Be Worried about Russia, Not Cyprus

Cyprus has gotten a lot of chatter on Wall Street these last two days. Long term, however, how much of an impact can a nation of just 1.1 million people really have on U.S. markets?

The more pressing concern is Russia – specifically, how Cyprus’ debt problems could become Russia’s. The world’s ninth-largest economy has more than $31 million tied up in Cypriot banks, according to Moody’s Investor Services. Now that Russia’s money is at risk, it could put the rest of the world at risk.

Unhealthy bottom lines at Russian companies and banks could have a trickle-down effect to U.S., China, Brazil and England, all of which frequently do business with Russia. Cyprus’ parliament voted down the country’s controversial proposal to tax bank deposits, a condition of its $13 bailout. All that’s done is create more questions.

If a new deal bailout deal can’t be reached in the coming days, Cyprus’ banks could collapse. So, in essence, $31 million of Russian money hangs in the balance right now.

Given Russia’s presence in the global economy, should Cyprus default, it could spark a multinational domino effect that impacts banks and companies around the world.