(FORTUNE Magazine) – When financier George Soros declared Aug. 13 that Russia's economy is in a "terminal phase" and suggested Moscow devalue the ruble, all hell broke loose: The Russian stock exchange dropped 15% as Boris Yeltsin tried to shore up the currency.

Soros' words were a reminder that Russia is sliding into economic chaos. Falling world commodity prices have sapped export profits, and the country's gangster image has scared off investors. Its stock market fell 75% this year; interest rates have hit 200%; its foreign debt has been downgraded. Meanwhile, the IMF just fed Moscow the first $4.8 billion of a $22.6 billion bailout. Now foreign lenders are running out of ideas and cash, and Yeltsin faces an unenviable choice: Default on foreign debt or devalue the ruble.

Although U.S. trade and investment in Russia are minimal (the U.S. trades more with Colombia), investors jarred by a crash could pull out of other emerging markets, triggering further collapses. Then there are the nukes. If Russia implodes, Yeltsin could be pushed out, and anything could happen. That's why the U.S. government is nervous. It doesn't want Russia's "terminal phase" to become our own.

--Jeremy Kahn