As David Milliband said this morning on the Today programme, when the Soviet Union invaded Hungary in 1956 or Czechoslovakia in 1968, no one questioned how the Russian stock market might be affected. It seems unlikely Khrushchev gave two hoots about the stock price of companies in 1956, other than he may have been quite pleased to note any sell off in the West. In 1968 Leonid Brezhnev was probably equally indifferent on the fate of the global stock markets.

It is not like that today. The Russian stock market has fallen by 18 per cent since the beginning of the month. Investors are nervous. And no doubt Dmitry Medvedev really is bothered by it all.

Earlier this week the FT ran an article by the Russian president justifying Russia’s actions. Can you imagine Mr Brezhnev resorting to penning articles in the Western financial media?

Today, Russia is a part of the Capitalist World – and as long as that continues there will surely be no new Cold War.

Russia also has its fair share of problems. We are so used to reading about gloom and doom in the West, and Russia flexing its muscles over gas pipelines, that we could fall into the trap of believing the world needs Russia more than it needs the world. But this is wrong.

It is true that Russia has enjoyed stunning growth in recent years, but Capital Economics believes this is largely due to little more than the economy making up for all those years of recession from the 1998 crisis. The stock market collapse of that year, and the deep recession that followed, left Russia working grossly below capacity. In recent years it’s been clawing that back, but when all that spare capacity has been filled, and there is good reason to believe that time is close, then the Russian economic growth story may come to an end.

Russia is also over-reliant on the high price of oil and gas. The 1998 crash was exacerbated by the then low price of oil. It seems hard to believe the economy can carry on booming if oil does indeed fall back in price, as has been predicted here.

Then there is Russian inflation. Inflation recently hit 15 per cent, and while this is largely down to soaring commodity prices, in Russia, unlike the West, the inflationary spillover effects seem more serious. Wages rose by 28 per cent last year, for example.

Furthermore, while gas has been hitting the pipeline in massive volumes, manufacturing and industrial production have not been so impressive, with the sectors recently showing signs of a major slowdown.

Capital Economics recently said: “With the threat of a harder landing increasing, it seems that economic concerns could overtake political concerns over the course of 2009.”

And in many ways that is where our biggest hope resides – not in a Russian economic crisis – but in a Russia that is a part of the capitalist system – that booms because of that, and ultimately learns she can only do this if she plays by the rules.

© Investment & Business News 2013