Russia in the Red

International News Story

The fall of Communist Russia in 1991 marked significant change to the world economy. With a shift toward a Capitalist system, Russia grew in profitability and became one of the largest players in the global market. However, in 1998, the financial system of Russia experienced a crisis in which banks were forced to close and Russia was forced to borrow billions to cover its debt. The results of the crisis were a  70% devalued ruble that led to widespread inflation, closure of national banks, the replacement of prime minister Kiriyenko and his entire cabinet, and a moratorium on repayment of debt to Western banks.

           The Russian economy slowly recovered, but the cause of the crisis highlighted problems in the still young Capitalist system. Experts agree that a business oligarchy within government led to corruption and neglect of the system. Men with economic power were in large running the government and causing massive debts then carried by the same government. A large-scale restructuring and reform of the economy improved conditions, and Russia escaped the grip of the larger Asian finacnial crisis.