Russia's 1998 default helped trigger a global market crisis.
On 17 August 1998, the Russian government devalued the ruble, restructured domestic ruble-denominated debt, and declared a moratorium on some foreign debt payments. The announcement followed falling oil prices, weak tax collection, political uncertainty, and pressure on Russia’s currency and government finances.
The shock spread through international markets. Investors became more cautious about emerging-market debt, and the failure of Russia’s debt payments contributed to losses at Long-Term Capital Management, a highly leveraged U.S. hedge fund. The Federal Reserve Bank of New York helped arrange a private-sector recapitalization of LTCM in September 1998 because officials feared disorderly liquidation could destabilize markets.
Russia’s crisis was part of a broader period of financial stress that followed the Asian financial crisis. It was not the only cause of the global turbulence, but its default demonstrated how quickly problems in one sovereign debt market could affect banks, hedge funds, and stock exchanges elsewhere.