Russia’s 1998 default triggered the major market shock known as the Russian financial crisis.
On August 17, 1998, the Russian government devalued the ruble, declared a temporary moratorium on some foreign debt payments, and restructured domestic ruble debt. The announcement followed years of fiscal pressure, weak tax collection, low commodity prices, and the continuing effects of the 1997 Asian financial crisis.
The ruble lost much of its value, Russian banks failed or became insolvent, and investors retreated from emerging markets. The crisis also contributed to the collapse of Long-Term Capital Management, a highly leveraged U.S. hedge fund, after losses and market disruption threatened broader financial instability.
The Russian crisis is sometimes described simply as a currency crisis, but the default and domestic debt restructuring were equally important. Russia later benefited from higher oil prices and improved fiscal conditions, helping its economy recover in the following years.