Russia’s government default helped trigger the 1998 global financial crisis.
On August 17, 1998, Russia devalued the ruble, declared a moratorium on some foreign debt payments, and announced a restructuring of domestic ruble debt. The measures followed years of fiscal pressure, declining tax revenues, political instability, and falling prices for key exports such as oil.
The crisis damaged Russian banks and sent the ruble into a steep decline. It also shocked international investors who had treated emerging-market debt as relatively attractive. Losses spread through global portfolios, particularly after the highly leveraged U.S. hedge fund Long-Term Capital Management suffered major losses.
The Russian crisis was part of a wider period of financial instability that followed the 1997 Asian financial crisis. It was not simply a stock-market event: currency devaluation, sovereign debt, banking distress, and capital flight all reinforced one another. Russia later benefited from higher oil prices and economic reforms, but the 1998 collapse caused a deep short-term contraction.