President Vladimir Putin and Russia’s economy have already become casualties of cratering crude prices, now at a five-year low. As global investors dump Russian stocks via the SPDR S&P Russian ETF (RBL), in tandem with the ruble (USDRUB=X), there are growing concerns about a possible contagion effect. “The real big effect is going to be Europe, Europe is clearly where the big problem is.” said Hugh Johnson, chairman, Hugh Johnson Advisors.

London's FTSE 100 (^FTSE) fell over 2% Tuesday as investors worry about the relationship between the European Union and its biggest trading partner Russia notes Johnson. “A very significant percentage of the European economy is exports in general, but exports to Russia.” Johnson notes further declines in WTI and Brent crude prices will compound an already compromised European economy. “You’ve got a real problem of a weakening economy, declining prices at a time when monetary policy is close to being disarmed and fiscal policy is contractionary.” warns Johnson.

Last week, the European Central Bank pledged to review the health of the region in early 2015 and assess whether a fresh round of quantitative stimulus will be needed. This uncertainty has prompted investors to unwind holdings of the SPDR Euro Stoxx 50 ETF (FEZ), off over 8% this year and it may prompt more selling in commodities. The iShares S&P GSCI Commodity-Indexed Trust ETF (GSG), which captures a basket of commodities, has lost 26% of its value this year.

If Russia’s problems spread to the eurozone, the U.S. economy and the S&P 500 (^GSPC) could also be at risk, however any downside will likely be muted in Johnson’s opinion. “I think the U.S. economy is not going to be, shall we say, significantly hurt because of the problems in Russia that are being transmitted to Europe.” Johnson says the U.S. economy can still grow anywhere between 2.9% to 3.1% in 2015.

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