The Russian government’s debt default in August 1998 intensified global market turmoil.
On August 17, 1998, Russia devalued the ruble, declared a moratorium on some private foreign debt payments and announced a restructuring of domestic government debt. The announcement shattered confidence in Russian financial markets.
The crisis followed falling oil and commodity prices, the continuing effects of the Asian financial crisis and pressure on Russia’s fiscal position. Investors rapidly sold Russian assets, while the ruble lost much of its value.
The consequences reached beyond Russia. The sudden repricing of risk helped destabilize Long-Term Capital Management, a highly leveraged U.S. hedge fund. The Federal Reserve facilitated a private-sector rescue in September 1998, but it did not directly bail out the fund.