The 1998 Russian financial crisis was the result of a perfect storm. A global drop in oil prices slashed the nation's vital export revenue. To cover persistent budget deficits, the government issued massive amounts of short-term bonds (GKOs). When investor confidence collapsed in mid-1998, yields on these bonds soared. The final trigger was the contagion from the 1997 Asian Financial Crisis, which spurred capital to flee emerging markets like Russia. The immediate aftermath saw Russia's GDP shri

The 1998 crisis wasn't sudden. For years, Russia funded budget deficits by selling high-yield bonds called GKOs, creating a dangerous debt pyramid. When global oil prices fell and the Asian financial crisis sparked capital flight, the pyramid collapsed. On August 17, the government announced a ruble devaluation and a 90-day moratorium on debt payments. Overnight, the ruble lost over two-thirds of its value against the dollar. The immediate aftermath saw GDP contract by 5.3% and the banking secto