Which 1998 Russian financial event triggered a major global hedge-fund crisis after Russia defaulted on domestic debt?

The Russian financial crisis was the 1998 event that triggered a major global hedge-fund crisis after Russia defaulted on domestic debt. Russia devalued the ruble and declared a moratorium on some foreign debt payments on August 17, 1998.

The crisis followed years of fiscal weakness, low tax collection, political uncertainty, and pressure from falling prices for important export commodities. Russia had relied heavily on short-term government securities, and investors became increasingly unwilling to refinance that debt. The ruble’s collapse sharply increased financial stress.

The shock spread beyond Russia through international banks and investment funds. Long-Term Capital Management, a highly leveraged U.S. hedge fund, suffered severe losses on positions that were expected to behave predictably under normal conditions. A private-sector rescue coordinated by the Federal Reserve followed. The Russian crisis was therefore both a national debt and currency crisis and a contributor to broader global market instability.