Russia's 1998 government default and ruble devaluation triggered a major financial-market shock.
On August 17, 1998, the Russian government announced a restructuring of domestic debt, a temporary moratorium on some foreign debt payments, and a widening of the ruble's trading band. The ruble subsequently lost much of its value and was later devalued.
The crisis followed years of fiscal strain, weak tax collection, low commodity prices, and heavy reliance on short-term government debt. Political uncertainty and the Asian financial crisis also made foreign investors less willing to finance Russia.
The shock spread internationally through banks and investment funds. Long-Term Capital Management, a large U.S. hedge fund, suffered severe losses partly because of its exposure to disrupted markets and was rescued through a private-sector arrangement coordinated by the Federal Reserve. Russia's crisis is therefore often discussed alongside, but not confused with, the 1997 Asian crisis.