In August 1998, Russia experienced what seemed a classical financial crisis, combining a currency crisis, a debt crisis and a banking crisis. The Russian crisis was also evidently connected with the earlier Asian crisis, and sent shock waves across global financial markets.

The Russian Federation was forced to devalue the rouble and declare a moratorium on its debt servicing. Russia was badly hit by unfavourable external conditions, but the main reason for the crisis was the inability of the fiscal authorities to bring the budget deficit under control.

When the rouble was devalued, the Russian Federation was unable to meet its domestic or external obligations. The holders of Russia's domestic debt were forced to accept unfavourable restructuring terms, and now also some holders of the old Soviet debt instruments have accepted a significant reduction in the value of their holdings.