The escalation of the Georgia-Russia conflict, which took a turn for the worse this morning, could do harm to the Russian exchange traded fund (ETF) if it continues.

Georgia launched an offensive in a breakaway region, and in retaliation, Russia sent in tanks, reports Renee Montagne for NPR. In Washington, calls were made for an immediate cease-fire, and a U.S. envoy is on the way to the region. Georgia is a staunch U.S. ally.

The region in debate, South Ossetia, is key to the Georgian president’s power. The country seeks to end South Ossetia’s independence, which it won in a 1991-92 war. Most of its residents have Russian citizenship.

Market Vectors Russia (RSX) is down sharply this morning, by nearly 5%. The long-term impact of this conflict remains to be seen, but they’re losses the fund doesn’t need. After a strong start to the year, it’s now 27.9% off its May 19 high, and down 17.1% year-to-date.

Tags: Eastern Europe, Emerging Markets, RSX, Russia