Russia defaulted on its domestic debt during the financial crisis of 1998.
In August 1998, Russia devalued the ruble and announced a moratorium on some private foreign debt payments while restructuring domestic government debt. The crisis followed years of fiscal weakness, low tax collection, political uncertainty, and pressure from falling commodity prices, especially oil.
The default had international consequences. Investors became more cautious about emerging markets, and the highly leveraged hedge fund Long-Term Capital Management suffered severe losses. The U.S. Federal Reserve helped coordinate a private-sector rescue of the fund to reduce the risk of disorderly market contagion.
Russia’s 1998 event is sometimes confused with the Soviet Union’s dissolution in 1991 or later sovereign defaults elsewhere. The key year is 1998, when the ruble crisis and domestic debt default became a major global financial shock.