Russia’s 1998 default triggered a sharp global sell-off and helped bring down Long-Term Capital Management.
On 17 August 1998, the Russian government devalued the ruble, declared a moratorium on some foreign debt payments, and restructured domestic debt. The announcement followed falling oil prices, weak tax revenues, political instability, and pressure on Russia’s currency reserves.
The consequences spread through international markets. Investors sold emerging-market assets and sought safer holdings, while credit spreads widened. Long-Term Capital Management, a highly leveraged U.S. hedge fund, suffered heavy losses because its positions depended on relationships that had historically moved in predictable ways.
The Federal Reserve Bank of New York helped coordinate a private-sector recapitalization of the fund in September 1998. Russia’s episode is distinct from the 1997 Asian crisis, although the two crises were connected through changing investor risk perceptions.