What 1998 crisis caused Russia to default on domestic debt and devalue the ruble?

The 1998 crisis that caused Russia to default on domestic debt and devalue the ruble was the Russian financial crisis.

Russia faced falling tax revenue, weak public finances and pressure from declining commodity prices, especially oil. The government had borrowed heavily through short-term domestic instruments, while confidence in its ability to maintain the ruble’s exchange-rate regime weakened. In August 1998, Russia restructured or defaulted on parts of its domestic debt and allowed the ruble to depreciate.

The shock spread beyond Russia. International investors became more cautious about emerging markets, and the highly leveraged hedge fund Long-Term Capital Management suffered major losses. The Federal Reserve helped coordinate a private-sector rescue of the fund, reflecting concern that its failure could disrupt global markets.

Russia’s crisis was not the same event as the 1997 Asian financial crisis, although the episodes were connected through global investor sentiment. Russia later benefited from economic recovery and higher oil prices, but the 1998 collapse caused severe domestic financial disruption.