The Russian Default

Russian Default of 1998

• severe economic + financial crisis triggered by several factors like;

  • economic instability caused by collapse of Soviet Union,

  • corruption and mismanagement,

  • weak institutions,

  • low consumer confidence,

  • and high inflation.

• mounting economic cost of war on Chechnya led to series of bad political decisions;

  • accumulated into massive financial crisis caused by failed sovereign + private sector debt obligations.

• when Yeltzin fired entire govt and appointed young, unknown politician Kiriyenko as Prime Minister

  • consumer confidence further eroded, collapsing bond prices.

  • speculative attacks from influential investors like George Soros worsened capital flight

    • caused ruble to suffer sharp drop in value.

  • default occurred when Russia failed to meet debt obligations

    • event caused turmoil in global financial markets, significant losses for international investors and contagion to other emerging economies.