Germany and Russia have a long and storied history of conflict. Within the last 100 years, WWI and WWII showed the depth that the hostility between these two powerful rival countries can take.
In 2012 Vladimir Putin muscled his way back into his former role as Russian president. Over the past few months Putin has been the target of Russian protests over his attempts to further include immigrants and outsiders.
It's like the Nazis in the 1920s - they were marginal until they got support from politicians and businessmen, and it brought the whole of Europe to ruin.
Within the last few days the tiny eurozone country of Cyprus has grabbed headlines as it was announced that an EU bailout for the struggling country would include a bank account levy on Cypriot depositors. Needless to say, the uproar of protests grabbed media headlines around the world.
Marios Mavrides, a Cypriot government MP and former finance minister told BBC2's Newsnight:
If we cannot come up with the €5.8bn in a few days then I think we will go to the Cyprus pound. That will be the end of Cyprus in the eurozone. We're going to exhaust all other possibilities but what can we do? If we have no other solution we cannot leave the people without money.
Cyprus is well known as a European tax haven. It has been reported that 40% of deposits ($31 billion) in Cyprus is Russian money. Russian energy giant Gazprom has major interests in Cyprus and has offered a bailout of its own.
On Tuesday CNBC reported that Cyprus's finance minister, Michael Sarris had arrived in Moscow to discuss a bailout from the Russian government.
Past conflicts between Russia and Germany have generally started with the perception that one side or the other is extending their imperial power beyond what the other is willing to tolerate.
Many players on the world stage see the EU as essentially an imperial extension of Germany. It is not difficult to see how this perception has been given legs as German policy toward peripheral countries in the EU clearly holds sway.
Tensions between Russia and the EU have flared in recent months over the EU's energy policies that Russia feels are attempting to restrict Russian energy giant Gazprom.
We may be seeing the rekindling of tensions between the old rivals, Germany and Russia, with the tiny island of Cyprus being the tinderbox.
Should Russia back a bailout for Cyprus that involves Cyprus exiting the euro, it would be a significant move, which may indicate that Russia is indeed interested in reducing Germany's power by diminishing the scope of the euro.
Another interesting facet of this situation is the fact that 77% of Cypriot citizens are Greeks. Greece has been suffering through years of crippling economic conditions. Much of this suffering is seen by the Greeks as being Germany's fault, due to the austerity measures imposed on Greece by the EU.
Should Cyprus be the first country to exit the euro, sentiment will likely be exchanged quite freely between the people of Cyprus and Greece, which may add to the potential for an eventual Greek exit from the euro. A Greek exit would likely be a much more significant blow to the strength of the euro and the EU, than an exit by Cyprus.
I would carefully watch for signals that Cyprus may exit the euro, which could be the start of much bigger moves for the currency. Shorting EUR/USD could be a profitable trade in a situation of this nature.
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Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.