Russia experienced the 1998 financial crisis that caused a major collapse in its stock market and ruble.
The crisis reached a decisive point on August 17, 1998, when the Russian government devalued the ruble, restructured domestic debt, and declared a temporary moratorium on some payments by commercial banks. The Russian Trading System index had already fallen dramatically, and the ruble’s value dropped sharply after the exchange-rate regime broke down.
Russia’s vulnerability reflected low tax collection, large budget deficits, falling commodity revenues, and heavy reliance on short-term government debt known as GKO bills. The Asian financial crisis also reduced investor appetite for emerging markets. The default and devaluation produced severe domestic disruption and contributed to the failure of the hedge fund Long-Term Capital Management in the United States, whose rescue involved major banks and Federal Reserve coordination. Russia later benefited from higher oil prices and improved fiscal conditions, but the 1998 episode remained a defining post-Soviet financial shock.