Ruble crisis

(1998)

   Also known as the Russian financial crisis of 1998, the ruble crisis was an outgrowth of the Asian financial crisis of the previous year. Falling commodity prices—which accounted for more than three-quarters of Russia’s gross domestic product—brought down the economy beginning on 17 August 1998. Tax revenues, which were highly dependent on oil and natural gas, suffered as well, and the situation was exacerbated by huge deficit spending, wage arrears, and a national economy wracked by the first Chechen War and transition to the free market.

   Boris Yeltsin’s ineffective response to the crisis led investors to flee the ruble and Russian assets, depleting confidence in the overall economy and sapping the stock market of two-thirds of its value. In the chaos, stabilization loans from the World Bank and the International Monetary Fund were misused and went missing. Between August and November, massive devaluation of the currency occurred, with accompanying street protests opposing the trebling of food prices overnight. Military units were brought in to quell potential violence, and certain regions were forced to take extreme measures to ensure the safety and security of food shipments. Responding to intense political pressure and calls to step down, Yeltsin dismissed his prime minister, Sergey Kiriyenko, hoping to replace him with Viktor Chernomyrdin, but was ultimately forced to accept the more nationalistic Yevgeny Primakov.

   After Primakov’s appointment, the situation stabilized rapidly, and the Russian economy entered a period of growth that lasted until the 2008–2009 global economic crisis. As a result of the 1998 crisis, the Russian population turned against further experiments of economic reform and exposure of the economy to globalization. The fallout of the ruble crisis was felt across post-Soviet space, with the Baltic States going into recession and economic slowdowns and currency devaluations in Kazakhstan, Belarus, and other members of the Commonwealth of Independent States.