Russia’s 1998 default and devaluation caused a major emerging-market stock crash.
On August 17, 1998, the Russian government devalued the ruble, restructured domestic debt, and announced a temporary moratorium on some foreign debt payments. The decision followed falling commodity prices, weak tax collection, political instability, and heavy pressure on Russia’s exchange-rate and debt system.
The Russian Trading System index collapsed during the crisis, while the shock spread through international finance. Investors became more cautious about emerging markets, and losses at the U.S. hedge fund Long-Term Capital Management threatened wider disruption because the fund had extensive positions with major financial institutions.
The crisis did not mean that Russia simply repudiated every foreign obligation. Its debt measures involved different categories of domestic and external liabilities, and later negotiations addressed outstanding claims. The ruble eventually stabilized after a sharp decline, helped partly by improved competitiveness and a later recovery in oil prices.